More than 100,000 financial advisors use iCapital, the alternative investments platform with funds from 560 asset managers, to allocate client money to private equity, private credit, hedge funds, and real estate.
But even though the platform has broadened access to managers such as Blackstone, Millennium, and Bridgewater, and made handling Schedule K-1 forms and building portfolios easier, the richest private investors have little interest in iCapital or its biggest competitor, CAIS.
Few single family offices — which are expanding their already huge allocations to alternative investments — are relying on the platforms, according to a Fidelity survey of 83 single family offices with a total of $432 billion in assets. When asked about their primary source of alternative investments, 72 percent of offices said it was their network of individual dealmakers (professionals at asset managers and investment bankers) and 25 percent cited other sources (external advisors, other family offices, and wealth managers). Only 2 percent said CAIS and none said iCapital was a primary source.
Brendan Cuddihy, chief operating officer at CAIS, stressed that family offices are outsourcing more of their operations and the burdens of investing in alts, which has made them a growing group of CAIS users.
“CAIS solutions centralizes all alternative investment activity on one platform and helps streamline their pre-trade, trade and post-trade experiences [and] supports many SFOs and MFOs, who source their own deals, because it helps them scale their alternative operations,” Cuddihy told Institutional Investor. But CAIS would not disclose how many single family offices it works with.
A spokesperson from iCapital didn’t respond to a request for comment on this story.
There are a few reasons that single family offices haven’t taken to the platforms yet. Offices with scale — ones managing billions of dollars of assets and a robust investment staff — likely already have systems in place to relieve some of the administrative headaches that come with investing in alternatives. That benefit of both iCapital and CAIS might not be as attractive to them.
The menu of funds available on the platforms continues to expand, but single family offices generally get premier access to investment opportunities that aren’t on the platforms, and actively co-invest and invest directly in companies. Additionally, offices know that they are attractive investors to asset managers so working directly with general partners could increase chances of a family office negotiating better deal terms.
No matter how appealing, a supermarket of alternative funds is not where family offices are getting investment ideas. They turn most often to their peers. Out of the offices surveyed by Fidelity, 69 percent said other family offices were where they generated investment ideas. They also are getting ideas from private equity fund managers (43 percent), consultants (31 percent), conferences (24 percent), and investment banks (23 percent).