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The Alternatives Mason: Building Alts Knowledge Brick by Brick | Episode 8 | Alternative Investment Mega Trends Featuring Andy Hagans
9 Plays1 year ago
Welcome to The Alternatives Mason: Building Alts Knowledge Brick by Brick. Banrion Capital Management uses technology to help independent advisors scale and educate themselves on alternative investments. Since education is such a big piece of the Banrion mission and business, we are excited to kick off this series to dive into the nits and grits of the alternatives space. Episode 8 "Alternative Investment Mega Trends" Features Andy Hagans.
Andy Hagans is a two-decade serial entrepreneur who helps High Net Worth Investors (HNWIs) protect and grow their wealth with alternative investments.
After founding, scaling and selling four different seven- and eight-figure businesses (including ETFdb, now part of VettaFi) to private equity buyers, he realized that there was more potential profit to be made on the buying side of private equity. He went on to purchase multiple businesses through private equity partnerships, and now partners with talented entrepreneurs and real estate developers through GP, Co-GP, and LP investments.
Andy is a co-founder of WealthChannel, the leading community for HNWIs who are placing capital in alternative investments. Andy also hosts The Alternative Investment Podcast, the #1 alts podcast reaching advisors, family offices, and High Net Worth Investors. In the show, he interviews asset managers, family offices, and industry thought leaders, as they discuss the most effective strategies to grow generational wealth.
Andy graduated from the University of Notre Dame, and resides in Michigan with his wife and five children.
Connect With Andy Hagans- The Alternative Investment Podcast on Apple Podcasts
- The Alternative Investment Podcast on Spotify
- Andy Hagans on LinkedIn
- Andy Hagans on 𝕏
Learn More About Banrion: Banrion Capital Management
Follow Brittany on 𝕏: @Brittany_Mason
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Subscribe to our YouTube Channel: @QueenofAlts
Important Disclosures:
The opinions expressed on the “The Alternative Mason Podcast” are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security.
It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results.
The guests featured on this program may be participants on Banrion Capital Management’s platform. As such Banrion may receive payment for their participation as a platform partner.
Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in
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Transcript
Introduction to Alternative Investments
00:00:01
Speaker
Welcome to the Alternatives Mason Podcast with host Brittany Mason, Chief of Staff at Bonner & Capital Management. You'll learn how to build alternative knowledge brick by brick. Bonner & Capital Management uses technology to help independent advisors scale and educate themselves on alternative investments. Since education is such a big piece of what we do, we are excited to kick off the series to dive into the myths and bricks of the alternative space.
Meet Andy Hagans: Entrepreneur & Investor
00:00:36
Speaker
Hello everyone, I am Brittany Mason and welcome to another episode of the Alternative Mason podcast. I am so excited today because we have another very special guest on the show, Andy Hagans. Andy Hagans is a seasoned entrepreneur with two decades of experience specializing in helping high net worth investors safeguard and expand their wealth through alternative investments. Having successfully founded Grown and sold several multimillion dollar businesses
00:01:05
Speaker
Andy ventured into purchasing businesses via private equity partnerships and now collaborates with talented entrepreneurs and real estate developers through investments as a co-founder of the Wealth Channel, the premier community of high net worth
00:01:20
Speaker
investors engaged in alternative investments. Andy plays an instrumental role and he is also the host of the Alternative Investment Podcast, the top-rated podcast in the alts realm, catering to advisors, family offices, and high network
00:01:35
Speaker
High Net Worth Investors. Andy holds a degree from the University of Notre Dame and resides in Michigan with his wife and five children. Oh my goodness, five children, Andy. That must keep you quite busy on top of it. Yeah, it does, especially working from home. It can get a little chaotic around here, but that's okay. That's okay. I can imagine. Oh my goodness. Would you say it's easier to manage the five children or these high network individuals that you work with?
Balancing Family and Finance
00:02:02
Speaker
Oh man. Well, that's a really good question. You know, I will say sometimes people ask me about having five kids and there's kind of like this hump around kid number three, I feel like. And then when you have five, the older two can kind of help a little bit with the younger ones. So it's, it's not quite, I mean, it can get a little crazy. Don't get me wrong, but it's not as quite as crazy as people think. Yeah. How old are they? I'm just curious.
00:02:28
Speaker
So the oldest is 10. Right now we have 10, eight, six, four, and two, but we're about to have a birthday that then throws, you know, the cycle begins, uh, actually on Thursday with the birthday.
00:02:39
Speaker
Oh my goodness. Such a busy time at the holidays now. I feel like once it hits Halloween, it's just basically the year is over. So birthday holidays and everything. Excuse me. Something I'm really curious about since you have, you know, five children and you work in finance, um, what are, how, how are you introducing the conversation around money and finance to your children? I always find it so fascinating how
00:03:06
Speaker
our relationship to money is formed in our childhood. So what sort of examples are you setting for your children? Whoa, that's a heavy question. What sort of example am I setting? I hope a good one, you know, but not a perfect one. Right. And I think to your point, you know, kids, they watch what you do, not necessarily what you say. Right. So they're probably absorbing what I do and what I say. But
00:03:32
Speaker
Hopefully, I hope that I'm teaching them values with money all under the umbrella of stewardship. I'm a Roman Catholic, and so I think my faith informs how I think about money.
00:03:48
Speaker
Uh, not to get too philosophical, but you did ask, I mean, my, my value is, you know, it's, it's just stuff, right? Ultimately money is just stuff. Uh, and we are stewards of, of things that we own on earth, you know, but, but ultimately I'm going to pass away and not, so money is not really the point. It's an instrument. It's a means to an end. Uh, and I hope that I'm imparting that lesson on my children. I guess that will remain to be seen.
00:04:17
Speaker
No, that's wonderful. I love that. I think that's really important. Yeah. Money can open so many opportunities and it's freedom, it's energy, it's not necessarily the material things that allows you to build a sense of security and safety and allow you to help others if you, you know. So I find that fascinating. And how about you when you were a child? What were your early
00:04:44
Speaker
What was your early relationship to money or introduction to money?
00:04:50
Speaker
That's a great question. You know, I grew up middle-class. I had great parents. I think they taught me a lot about the value of hard work, you know, and it's just, it's sort of a, I guess, a value in my family, just from my siblings that we've picked up from our parents, just a healthy respect for work and meaningful work. Not that you necessarily, um,
00:05:15
Speaker
You know, live to work, right? You work to live, you don't live to work. But, you know, just this sort of idea that, you know, even as teenagers, we were encouraged, almost expected to get jobs, part-time jobs. It's like, well, if you want a car, you're a teenager, you want a car, you're going to be paying for your insurance or at least helping pay for it.
00:05:37
Speaker
And I think that was a great thing to absorb, just kind of the idea of, even as a teenager, beginning to take responsibility for our finances, for things that we want. And additionally, I would say, my mom was a teacher. My dad was a business owner until he retired. He owned a car dealership.
00:06:00
Speaker
and I actually worked part-time for him and I think I absorbed so much philosophically, temperamentally, also just practically like in terms of street smarts just sort of observing him run a business and I think in that respect I was really fortunate because
00:06:20
Speaker
it never really occurred to me that i could enter or wouldn't own my own business like no one ever told me that i would someday. But i think i just observed my dad and i was like well obviously i want to be my own boss and be a business owner someday. So that was the birth of you becoming a serial entrepreneur.
00:06:39
Speaker
I think it was.
The Beginnings of Entrepreneurship
00:06:41
Speaker
Yeah. And you know, my business, my current business partner, Jimmy Atkinson, he was also my first business partner when I was age 19 or 20, because we were college roommates and his dad was a business owner too. So it's kind of interesting. Like both of our dads were entrepreneurs and business owners. And then.
00:07:02
Speaker
I'd never met Jimmy before and we were roommates at the University of Notre Dame. Like the, the, the university doesn't let you pick your roommates or anything. They just kind of stick you with people, uh, which is interesting. So you, you know, you meet new people and I met Jimmy and we kind of just became friends and we were both into websites and internet stuff and also finance.
00:07:31
Speaker
And so really, now that I think about it, you know, we've just, we just started building a business kind of around those things. And then we did that later on in our twenties. And we're literally still doing that today. So fascinating. So you guys connected early on. Yeah.
00:07:49
Speaker
Yeah. And, you know, it was so cool to have that experience in college where there wasn't really any pressure, right? So like our first business was just like, just throw up a website and try this or try that. And like, maybe we can make enough money to pay for beer next weekend or, you know, whatever. So,
00:08:09
Speaker
I think a lot of people, they have trouble just getting started because they're so afraid of a failure, I guess. And we just kind of did it like, this is no big deal. Let's just go build something and see if it works. What was your first business?
00:08:24
Speaker
We were, you know, it's, it's almost hard to explain and I don't even remember all the details, but the basic gist of it was we discovered this thing called Google AdSense, which was their advertising platform for publishers.
00:08:40
Speaker
And there was no bar or threshold to sign up. So you could have a website or a blog about any given business topic. And even if it only got a couple thousand page views a month, they would still accept you as a publisher. And every time somebody would click on one of the ads, you get a pay per click. Google would take their 30% or whatever, and then they'd pay the publisher.
00:09:09
Speaker
And so we found out about that. And our idea was, let's go look for keywords, like in the advertising console, Google AdWords, that are really expensive per click. And then we'll make a website about that topic and publish content about that topic. So we found out, I didn't even know what RFID was. Jimmy knew what it was.
00:09:34
Speaker
But we found out like people are really bidding on this term RFID. It's kind of this business to business industry at that time it was. And so we started publishing news and information on RFID and we got in the Google AdSense program.
00:09:51
Speaker
And made money that way. And like, I forget what the threshold was, but it was something like if you made $50 in a month, Google would send you a check. So we, you know, we'd get a check for $50 or whatever. And it's like, cool. And then that, that kind of, that never really got.
00:10:09
Speaker
big, but it introduced to us the concept of publishing and getting content out there and attracting eyeballs. And I think that was a skillset that really has carried us all the way up until today.
Business Lessons and Failures
00:10:24
Speaker
Really? Wow. Yes. That was going to be my next question. What did you learn the most from that experience starting your own business? So those tools you you've used even now.
00:10:35
Speaker
Totally. Yeah. You know, audience development, traffic development. But I think the biggest kind of life lesson that we learned is
00:10:48
Speaker
You know, you go into some industries and there are literally gates or gatekeepers, right? Like if you want to be an attorney, you're going to need to go to law school. You're going to need to get a law degree. Like that's kind of a gate that you have to pass through. With business, with internet business, you know, a lot of industries
00:11:09
Speaker
There is no gate, right? There's no one that will tell you like, you're not allowed to do this, you can't do this, right? And so I think we really, both of us internalize that lesson. And it kind of gives you this confidence and it's almost like,
00:11:27
Speaker
anytime you do something new, depending on what it is, you might have an imposter syndrome. Right. So yes. Like, like my current podcast, the alternative investment podcast. Now we're on episode, we're quite close to 170 something episodes. Yeah.
00:11:42
Speaker
But episode one, I'm like, I don't really know that much about alternative investments, but I'm interested in them and I'm passionate about them. So I'm just going to start it and like, we'll just see what happens. But I think a lot of people get stuck there and they go, well, you know, I'm not a real expert on this topic, so I shouldn't add my voice, you know.
00:12:03
Speaker
Exactly. I mean, honestly, I've struggled with that myself too. I mean, I only moved into finance a couple of years ago and my background is more marketing and advertising. So something that's entirely different. And so it was definitely a challenge and a big personal fear, but I had to just, I just dove right in.
00:12:21
Speaker
And, you know, I became a banker first and then moved over here to Bonnerian, but definitely imposter syndrome, I can relate. I think we all can for sure when you're starting something that's new and different, but the hardest part, yes, it is just jumping in, going for it. And so I'm just encouraging everyone that's listening to just go for it, just learn. And all the information is out there at our fingertips now too.
00:12:48
Speaker
So I'm curious, how many businesses did you build and sell before then moving into investing into private equity?
00:12:58
Speaker
So yeah, Jimmy and I were just at the University of Notre Dame the other day giving a lecture at the Fitzgerald Institute for Real Estate, and a student actually asked that question because we said in our presentation that we'd built and sold four different businesses before founding Wealth Channel, which is our current business.
00:13:21
Speaker
And then I had to tell the student, you know, I don't think we were entirely honest with you before, not that we really meant a lie, but we didn't tell you about the 10 plus other businesses that we started that totally failed, flopped, fizzled, you know, whatever word you want to use. So Jimmy and I have, we've done at least, I want to say 15 businesses or tried, you know, many different things, but we had four businesses that we actually, you know, exited for like a significant exit or capital gain.
00:13:50
Speaker
One of those, probably the most that intersected really with like hard finance was ETF database. So we created that right around 2010, 2012 was when it was at its peak. And at its peak, it was the largest independent media covering exchange traded funds in the United States.
00:14:11
Speaker
Um, that business was a ton of fun just to build to, to, you know, at that time it was a smaller universe, but to take the universe of ETFs and kind of sort them into categories. And we had this screener tool that was very popular with investors and advisors, but we ended up selling it. Um, and it got rolled up into this larger company now. Um, and it's, it's, it still exists by the way, ETF database. Um,
00:14:40
Speaker
But with all these different exits, Jimmy and I both, you know, it's, you have the liquidity event, you have capital, and you're always essentially told max out your 401k, max out your IRA. Those are great things to do. Like, absolutely. But once you do that, it's like, well, now what? And, you know, you realize, well,
00:15:05
Speaker
All this money goes into a taxable account if that's how you're investing it. Taxes are a huge headwind. And so you realize a lot of family offices, a lot of accredited investors, they're investing
00:15:21
Speaker
differently. Not everyone, but the more sophisticated ones are, they're looking for alternative investments, they're looking for tax-advantaged investments, and they're typically investing in some of them. Again, not all of them, but the more sophisticated ones are investing in illiquid investments that can achieve
00:15:42
Speaker
higher returns, especially after tax, and have less volatility than that market portfolio like last year. If you were heavily invested in the market, obviously, there's a lot of volatility. I got into alternative investments, not really on purpose. It was more just a result of having these liquidity events as an entrepreneur.
00:16:07
Speaker
and seeing those opportunities, yeah.
Exploring Wealth Channel & Opportunity Zones
00:16:10
Speaker
So as the co-founder of the Wealth Channel, what inspired, so that's what inspired you to start that community. You saw a need in the industry. What did you want to create with the Wealth Channel? Exactly.
00:16:22
Speaker
Yeah, great question. Well, Jimmy actually started our business. So the seed of Wealth Channel actually started in an opportunity zone. So I don't know if you're familiar with opportunity zones or not. I mean, I know a lot of people aren't. So the gist of opportunity zones for your audience is it's a tax incentive that allows people to invest in underprivileged, underdeveloped economic areas, census tracts in the United States.
00:16:50
Speaker
And in return for that private capital being invested you get significant tax benefits so you can defer capital gains by investing into opportunity zones. So that program was announced, I believe it was the 2017 or 2018.
00:17:08
Speaker
And Jimmy had the idea, you know, like his light bulb went off as soon as it was announced. I'm going to start the first media property to cover opportunity zones because I think they're going to be huge. Kind of like a 1031s in the real estate industry, you know, they're like this big mature tax incentive that everybody uses. We believe opportunity zones can be that someday.
00:17:34
Speaker
So he started a podcast. He started this media property and an event series called OZ Pitch Day that was connecting accredited investors on the one hand with opportunities on funds. On the other hand, at these live events, you know, so that investors could kind of see the different projects and funds that were open that they could invest in.
00:17:59
Speaker
And so that media platform was called OpportunityDB and it was growing and Jimmy called me one day and told me about it and he was like, you know, this is going well, but I think I might need help scaling it. And so I was like, all right, let me invest. Let me come on, you know, come aboard and help you scale this thing. So I invested in OpportunityDB and have helped him to grow the Opportunity Zones media platform.
00:18:28
Speaker
And then again, almost by accident, a lot of these fund sponsors that we were talking with and working with, they had other funds that were non-opportunity zone funds that were just other types of alternative investment funds.
00:18:43
Speaker
And we realized, well, some of these other funds, whether it was farmland or other types of real estate or DSTs, there's still interesting investments that we had a passion for that we wanted to cover. And so that's when we launched the Alternative Investment Podcast. And so essentially, we're still covering opportunity zones. That's kind of where we have the really deep connections in the private equity world.
00:19:11
Speaker
But we wanted to broaden out, cover some of these other opportunities. And so we do events, content, education, all around all these types of alternative investments and with a specific special emphasis on real estate and opportunity zones.
Diversification & Tax Incentives in Alternative Investments
00:19:28
Speaker
What are some of the common misconceptions that you address on that podcast?
00:19:39
Speaker
I'd have to really think about that. I mean, honestly, it's not even misconceptions with alternative investments. I found that most people simply don't even know what they are. They're so vast.
00:19:56
Speaker
Exactly. And Jimmy and I, we usually define them by what they're not, right? We usually, someone says, what's an alternative investment? And it's like, well, anything that's not a stock or bond or cash is an alternative investment. So almost everything is, you know, if you think about it that way. Yeah. So can you discuss the role of alternative investments in wealth protection and growth and why, you know,
00:20:23
Speaker
in a deeper, the secret sauce for high net worth investors? Yeah, that's a great question. And I think the interesting thing to me when I started covering the space, I thought the growth, the alpha, the enhanced returns was going to be the primary attraction for most investors for alternative investments.
00:20:48
Speaker
But over time, I realized I think the primary attraction to them is really the portfolio diversification. If you look at research, depends on who you ask, it depends on which source you're referring to, but it's increasingly universally acknowledged that adding alternative investments in an intelligent way to diversified portfolio lowers risk, lowers volatility.
00:21:14
Speaker
And I think that is the core appeal, even for advisors who are, you know, they're adding alternatives to client portfolios. I think it's really because of that, because they lower the volatility. And then I think the other reason is, you know, clients are asking for it. So they're responding.
00:21:30
Speaker
So that's the protection part is they can lower volatility. And again, you always have that question of what is the time horizon of the investor? Can they even afford to invest in illiquid investment? So I don't think that there's a one size fits all answer for everyone. Like I wouldn't say that every single person in the world needs alternatives in their portfolios. It really depends. Risk tolerance, investment, time horizon, and those other constraints.
00:21:58
Speaker
But as far as the growth, I think where alternatives are really powerful is for private investors. One of the things I talk about when I really learned about alternatives and got super passionate about them, I read a book called the Ivy Portfolio by Med Faber, who I had on my show. He's an incredible guy, really smart guy.
00:22:22
Speaker
But in the book, he talks about how the IV endowments, the Yale Endowment, Harvard Endowment Fund, they've been investing in these illiquid alternative investments for years, achieving alpha by investing in things that retail investors really couldn't access. And one of the reasons that they were able to do that is because they didn't really need liquidity, right? If you're an endowment fund,
00:22:47
Speaker
your liquidity need is very predictable year in and year out. It's going to be like five or 6% of your principle. But the thing is with institutional investors, they're not usually getting any tax benefit, right? If you're a nonprofit investor, if you're an endowment fund and a nonprofit, a lot of the tax benefits of alternatives
00:23:13
Speaker
don't even accrue to you because you're not necessarily paying the same taxes that we private investors are anyway. So I think then if you look at a private investor, if you look at something like an opportunity zone incentive or think about 1031 exchanges or private energy investments with depletion,
00:23:32
Speaker
Those tax incentives are so powerful for private investors because when you run the returns through that lens of triple net returns, returns net of fees, net of inflation, and net of taxes, then you go, oh wow, this may have been a similar gross return pre-tax compared to the stock market or compared to the bond market.
00:23:56
Speaker
But then when I add in that tax advantage, it might be an extra 200 basis points or 300 basis points of annual return. And then that tax savings is going to compound, right? So yeah. Yeah. That, that to me is the, is really the, if I could sell alts, if I could be like an unofficial alts spokesperson, that would be, that's, that's the pitch. So if it appeals to you, great. If not.
00:24:25
Speaker
So what is your strategy then for your selection process when you evaluate potential investment opportunities in private equity?
00:24:35
Speaker
Yeah, that's a good question. And I think it depends on the type of investment. So I really make two types of investments in private equity. One type of investment that I've made is just as a pure limited partner as an LP. And then I'm usually, it's more of a typical investment where
00:25:00
Speaker
You evaluate the offering, you do due diligence, you look at the prospective returns, you look at the underwriting, obviously look at the deck, talk to the GPs. And when I'm evaluating investment offerings as a limited partner, the biggest thing I look for is track record. Because
00:25:21
Speaker
You know, things always go wrong, right? There's no, you know, when, when someone has a real estate project and they plan to build this big multifamily development and there's a seven year hold or 10 year hold or whatever, like nothing is going to go exactly as planned. That's the one thing you can know for sure. Like what's ever in the deck, it's not going to work out exactly the way that it's in the deck.
00:25:46
Speaker
But if you're investing with a general partner, a GP, a fund manager who has experience in this asset class, whether it's energy, real estate, whatever it is, credit, and they've been through multiple market cycles. You know, they've seen the peak, but they've seen the trough multiple times.
00:26:05
Speaker
And, and I'm convinced that they're an honest, you know, square operator to me, that's the biggest thing. That's what makes me feel safe and confident as a limited partner is evaluating, not just the offering, but the sponsor. Then on the other kind of side of things is when I'll invest as a, you know, co-GP or as a strategic investor. That's more, I guess I would call it micro private equity. That's where I'm looking for.
00:26:34
Speaker
Very small companies, especially on the private equity scale, you know, this would be micro P small companies where I can add strategic value with my, you know, my knowledge of either marketing or the industry landscape.
00:26:50
Speaker
or whatever. And those investments for me tend to be the most fun, you know, where I can get to know the team and maybe be on an advisory board. And they also typically have the most variance in the sense that those types of investments, at least in my experience, they tend to either go belly up,
00:27:11
Speaker
or generate, you know, amazing returns, you know, kind of that more venture capital power law type return profile. Well, what kind of advice do you have for people that maybe even want to follow in your footsteps, you know, young entrepreneurs that are looking to invest, you know, or, or investors looking to, you know, partner in private equity?
Advice for Young Entrepreneurs
00:27:37
Speaker
Yeah, that's a good question. Well, I would say, you know, getting started as an investor, you know, I wouldn't, I wouldn't suggest that anyone necessarily like
00:27:50
Speaker
just skip ahead past traditional investments. So just to be clear, I own stocks, I own bonds. And I think it's really important to just build those habits of, am I maxing out my IRA? Am I maxing out my 401k? Am I sort of doing the core basics?
00:28:12
Speaker
but presuming that you already are sort of doing the basics and you're maximizing all of that tax advantaged investment space that's available to you. Then I think really it's deciding, do I wanna be more of an entrepreneurial GP type investor? And that's really, you're really at that point an entrepreneur who's also investing in businesses along with your sweat equity.
00:28:40
Speaker
Or do I want to be a limited partner and invest passively like maybe you're a doctor or lawyer or you maybe you have a business but you want to invest in other businesses but you don't really want to get involved in those other businesses, which I think is totally fine.
00:28:56
Speaker
You know, I think being an LP is one of the best things in the world, right? Because you get to invest in an offering, you get to kind of be, be part of the club, I guess, so to speak, of, of, of the people who are funding that deal. And then you don't have to deal with any of the headaches, right? Sorry, my dog, the joys of working from home. Yeah. No worries. Oops. Sorry about that. Yeah. All good.
00:29:25
Speaker
All right, but yeah, so could you share some success stories or, you know, some examples of how alternative investments have helped your high net worth investors preserving growth or wealth?
00:29:42
Speaker
Yeah, I mean, definitely some success stories just from the Opportunity Zones world. Why don't I start there? Yeah. We have at OpportunityDB, we have partnered with multiple GPs who are raising Opportunity Zone funds that are doing ground up development all over the United States. So one of these partners is Urban Catalyst, and they're developing
00:30:09
Speaker
office residential or multifamily mixed use space in San Jose and so they're they're building these beautiful you know big like it has to be said there's big beautiful projects in downtown San Jose
00:30:27
Speaker
And I have seen so many investors connect with our opportunity DB, you know, our media operation and our events who went from not even knowing that the opportunity zones tax incentive exists to realizing, well, I have a capital gain, I can defer it. And then actually placing that investment
00:30:53
Speaker
with either urban catalyst or we have several other, you know, different funds that we work with who sponsor our events. Um, and to me, when you're able to defer a capital gain, you're locking in like, like I call it alpha. I mean, I know it's not technically alpha if you read a finance tech textbook, but when you defer a capital gain in that way in a way that you otherwise weren't going to do.
00:31:18
Speaker
You're locking in a ton of what I call alpha, instant return, guaranteed return. You've just lowered your tax bill in 2023 by deferring this capital gain and reducing it. And now you're also a limited partner in this amazing real estate project that I think could deliver very high returns.
00:31:42
Speaker
Same thing is true outside qualified opportunity funds with 1031 exchanges. We see investors who want to exit a property they own to a 1031 exchange into a DST, and now they're invested in institutional grade real estate, having exited their previous property and paid no capital gains tax on it whatsoever.
00:32:05
Speaker
So I guess what kind of fires me up, gets me excited is seeing people get these tax wins because it's a free lunch. Our other business partner, Michael Johnson, he calls it the free lunch. It is, it's a guaranteed return. If you can optimize your portfolio, reduce your tax bills, now I have more capital, more in my principle that can now compound indefinitely, right?
00:32:36
Speaker
What are some other favorite wealth strategies that you have that advisors tend not to utilize? Well, that's a good question. I mean, I would say that the, the co-GP stuff, the more entrepreneurial angel investing, micro private equity.
00:32:57
Speaker
It's the Wild West and I'm going to say that I love it. And again, I think my best personal investments have been in that micro private equity space.
00:33:11
Speaker
But I also want to say, buyer beware, if you don't know an industry and a team really well, I'd almost advise people not to do micro-private equity. So I understand, one thing I respect about RIAs and advisors
00:33:33
Speaker
who don't chase every fad is it's okay to not invest in everything. Even across the alternatives landscape, there's so many different types, asset classes within alternative investments. It's going to be really hard to be an expert in every area to evaluate asset managers, fund managers in every sector and every sub sector.
00:33:58
Speaker
And I think it's okay for advisors to say, you know, these are the major asset classes and maybe these are some alternative asset classes that I know well, that I'm comfortable with, you know, doing fund selection, doing investment selection. There's some of these other asset classes that I'm not an expert in, that I don't feel comfortable evaluating.
00:34:21
Speaker
and it's okay to just pass on them. I really do respect that. I think that's a lot better than the converse, which is pretending to know everything and pretending to be an expert in every art, which just isn't possible in alternatives, right? Right. And it's always changing. The industry is constantly evolving and changing as well.
00:34:44
Speaker
We have to stay on that. So your favorite, some of your favorite strategies, you know, you were saying earlier real estate. What are some of your other favorites as well for types of alternatives?
Trends and Learning in Alternative Investments
00:34:57
Speaker
Well, uh, you know, I'm bullish on energy right now. Okay. So I think it's a little bit of, uh, Oh, is it contrarian? I know you'd have to tell me, is it contrarian to invest in oil in 2023? I feel like it is a little bit contrarian. I know the price of oil is higher, but it's, it's, it's, you know, alternative energy and renewable energy is obviously most people think of that as the future. Mm-hmm.
00:35:24
Speaker
but the world still needs oil. And we need a lot of it. It turns out we need a lot of it. And so I think there's a big opportunity for private investment in oil. It's a little bit like micro private equity or some of these other asset classes where if you don't know what you're doing, if you don't know how to diligence and offering,
00:35:44
Speaker
It can be tough. It can be very risky to be a private investor, but I also think there's a lot of opportunity there. Certainly real estate. I mean, real estate, I almost hate to just say real estate because there's so many opportunities within real estate. But to qualify real estate a little bit more, I'm really interested in the tax-advantaged real estate offerings, right? So as an investor or even just
00:36:07
Speaker
If someone asks me, how do you invest your own money? I'm not an advisor, so I'm not giving investment advice. But if someone asks me, where should I look? That's the first thing I point people to, is the tax-advantaged forms of investing. So in energy, private energy investing in oil and gas, that is generally very tax-advantaged.
00:36:28
Speaker
And I think in real estate, there's really no reason to invest in real estate if it's not in a very tax-advantaged way, right? Because there are all these opportunities to invest in real estate with tax advantages. So it's like, why would I invest with just kind of a plain Jane, non-tax-advantaged offering? So one interesting strategy that I think a lot of people can look at is
00:36:53
Speaker
If you own real estate, if you can generate a capital gain through the real estate, you can do a 1031 exchange, potentially into a DST. With Opportunity Zone funds though,
00:37:06
Speaker
If you can engineer any kind of capital gain, even if it's not from real estate, if it's from stocks, bonds, mutual funds, whatever, any kind of capital gain is eligible to be invested into an opportunity zone fund. And Jimmy and I, we have invested in obviously real estate funds that are structured as qualified opportunity funds.
00:37:29
Speaker
We are also limited partners in a venture capital fund that happens to be an opportunity zone fund because it just so happened that the campus for this venture capital, like their headquarters just happened to be located in an opportunity zone fund. So I'm all about being creative, like in a, in a very above board and legal way, but being creative in finding ways to, you know, find tax advantage investments in every asset class.
00:37:58
Speaker
Yes, it's all about being innovative and finding new ways to make things work. So what other trends are you seeing emerging for alternative investments?
00:38:11
Speaker
Well, I mean, I'm guessing that the same trends that, you know, Bonrion and your team that you're kind of at the forefront or that you're pushing, which is just increased advisor adoption, obviously, from client demand. I think ultimately because clients are demanding alternatives, I think
00:38:31
Speaker
advisors are saying, well, we're going to offer them, right? I don't want my client to leave. And they're asking for this. So I have to offer it. So I think that is a huge trend. And, you know, for sure, the democratization trend, you know, you have 506 C offerings where
00:38:46
Speaker
you know, fund sponsors can directly solicit their offerings to investors. So I think that's interesting that there's now not everything is going through a broker dealer, right? There's different types of sales channels and sales cycles for different fund sponsors. The biggest trend is just the macro trend of this industry has grown to such a huge size. I mean, it's, it's amazing, but the, but the really amazing thing is,
00:39:17
Speaker
With the industry essentially having like what tripled in size in the past decade or so, it is still growing depending on the, you know, the asset class within alternatives. It's still growing at five, six, seven, eight percent.
00:39:31
Speaker
a year or more. And generally, industries that are that big don't continue growing at that pace, as they mature to be as large as the alternative investment landscape is. And so I think growth is just, it's the biggest headline. And personally, I don't see anything slowing it down, do you?
00:39:53
Speaker
I don't, I don't. And typically I like to ask my guests too, you know, do you feel the 60-40 is dead since we are seeing such this massive growth for alternatives now? Do you?
00:40:06
Speaker
Uh, yeah, I mean, it's, it's, I haven't heard anyone disagree with that in, uh, years now, I think. So I'm definitely not going to be the person. It's certainly evolving. Well, and, and, and, you know, your statement is the 60, 40 dead. And I think everyone's saying, yeah, it is dead. And, you know, that the fact that that's now mainstream is that, you know, that most advisors would agree with that statement. Yeah.
00:40:35
Speaker
To me, that's amazing. That's a sea change from 20 years ago. Yes, for sure. So how do you like to stay informed to continually educate others on alternative investments? What are some of your favorite outlets and resources?
00:40:53
Speaker
Well, I'm going to cheat on this one and I'm going to self promote my podcast, the alternative investment podcast, but I will say, I will say, I think it's true though, in the sense that, so I have this show, the alternative investment podcast, and I interview industry stakeholders. Like I'll have, you know, executives from Kaya or I capital organizations like that, as well as asset managers, fund managers.
00:41:20
Speaker
all kinds of different industry participants on the show and I'll interview them in like a long form interview. And for me, it's just, it's been the best way to learn because really two reasons. One is I'm getting connected with all these high level people from around the industry. And I can essentially ask them anything within reason. But then the second thing that is great about
00:41:45
Speaker
uh, being the podcast host of this show, I'm not an advisor or like a asset management executive and no one expects me to know everything. And so I've just decided I'm going to ask all the dumb questions. And sometimes it might be a question that like a listener doesn't know the answer to. Sometimes it might be a question that actually, I don't know the answer to, but either that doesn't matter, but there's just no pressure on me. I'm like, I'm going to ask what I think.
00:42:15
Speaker
A lot of people in the audience, uh, might be wondering, but, you know, afraid to ask. And I think sometimes advisors or professionals in the industry, um, it can kind of be hard to just ask those kinds of dumb questions. Cause you feel like you have this pressure on you to kind of know everything. And I don't feel that pressure because I'm like, Hey, I host the show. Doesn't mean I'm an expert on all this. It's really my guests who are the experts.
00:42:42
Speaker
Absolutely. I exactly can relate to you a hundred percent. You know, as I have been honest, I'm learning as well, you know, it's a new space for me. So, but I find it so fascinating and very passionate about it, just like you. So, um, learning so much. So what advice do you have for me then? Wait, I don't, I think, uh, well, first of all, you're working for a great organization. Um, I love Shana. I love Bondrian. I mean, I think amazing team. I love my team.
00:43:12
Speaker
Yeah. So I think you're, you're already doing it right. And I love that y'all have your own podcast now. I mean, the thing is with the education gap, it's this recurring theme in the alternative investment landscape. There's an education gap, not only with investors, but even advisors. And, uh, not to sound cheesy, but I think it's going to take a village, right? There's not one silver bullet, whether it's Kaya or
00:43:36
Speaker
you know, different educational organizations or my show or your show or other content on YouTube and books, like it's going to take like an all of the above approach, I think to all that. I took the Kaya before the fundamentals and alternative investments. It was a really great course, very in depth, very in depth. Really good. Nice. Definitely recommend that. OK. How how long does that program take the fundamentals courses?
00:44:05
Speaker
at your own pace. So it really just depends, you know. So it just depends on how you go through it. But I definitely recommend that for people who are interested. It's really good. What are some of your favorite books that you've read?
00:44:21
Speaker
Well, I mean, Ivy portfolio for me was like the, the, the seed, I guess, uh, the, the seed that got planted that really got me into alternatives. So I have to, I have to mention the Ivy portfolio by med favor. I love the old Ben Graham books. I never get tired of Ben Graham. I mean, I think a lot of investing success comes down to.
00:44:44
Speaker
wisdom rather than intelligence. Like you see highly intelligent people make unwise decisions and, and, you know, not, you know, maybe fail or not have success. And by the same token, you might see less sophisticated people, but who are wise with their approach succeed. So I'm going to recommend Ben Graham to me, the classics, uh, never go out of style. The intelligent investor, I forget the title of his other book, but, uh, is it
00:45:14
Speaker
securities and that. Intelligent investor. I'll stick with that one. Yes. Love it. All right. Writing that down. Well, thank you so much, Andy. I think we are out of time. It's been wonderful to sit down and chat with you and learn a little bit more about your background. I love your philosophy on
00:45:35
Speaker
money and how your relationship to money and what you're how you're teaching you know your children as well. And so it's been very very interesting to learn about your journey and everything that you're doing and I agree it will take a village for us to really educate people on alternative investments. So thank you for taking the time to chat with me about them and thank you everyone listening. We're really excited to you know sit here and chat with Andy and
00:46:03
Speaker
We look forward to our next episode. Thank you everyone who's listening and we'll see you next time right here live on the green couch.
00:46:12
Speaker
The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or any specific security. It is only intended to provide education about the financial industry. To determine which investment may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results.
00:46:37
Speaker
Any indices referenced for comparison are unmanaged and cannot be invested in these records. As always, please remember, investing involves risk and possible loss of capital. Please seek advice from a licensed professional.