Overview

Shana Sissel is the Founder, President & CEO of Banrion Capital Management, an alternatives technology platform helping to simplify investing in alternatives for advisors and assessment managers. She’s a frequent speaker and contributor to major outlets like CNBC, Fox Business Network, Bloomberg and the TD Ameritrade Network. And she’s a fierce advocate for women in finance.

In this episode, we explore the rising popularity of alternative investments, the difficulties advisors face in navigating this space, how Banrion is making it easier for advisors, and how these investments can be incorporated to improve a portfolio. We also discuss cryptocurrency, rate cuts and much more.

Please enjoy our conversation with Shana Sissel, “The Queen of Alternatives”.

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Links:

The Investipal Podcast is produced by ⁠⁠www.investipal.co⁠⁠. Past guests include Peter Lazaroff, Douglas Boneparth, Jamie Hopkins, Tyrone Ross and many more.

Follow us on LinkedIn: www.linkedin.com/company/investipal⁠⁠ | ⁠⁠www.linkedin.com/in/cameronhowe/; Twitter: www.twitter.com/camhowe16 | www.twitter.com/investipal; Tiktok: www.tiktok.com/@camhowe16 | www.tiktok.com/@investipal; or Instagram: www.instagram.com/investipal/

Find Shana Sissel at:

https://www.shanasissel.com/

https://www.instagram.com/finance_queen2020

https://twitter.com/shanas621

https://www.linkedin.com/in/shsissel/

https://www.banrioncapital.com/

https://www.youtube.com/channel/UCMl9AOTVZEy8EYMh-qXRzsw/featured

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Key Takeaways

1. Alts are continuing to grow in popularity, but there are still issues with access and education - even for many advisors
2. Existing Alts platforms are either missing key components advisors need such as advisor-friendly research, education, and access, and/or they are owned by larger institutional players that push their own products. Shana created Banrion to fill this need.
3. The inclusion of Alts aren’t meant to “blow up’ the traditional 60/40 portfolio, but should rather be seen as an evolution that can add unique risk/return characteristics and even better align a portfolio with client passions (e.g. fractional ownership of a sports team)
4. Shana emphasizes the importance of operational and investment due diligence for all types of investments, and especially so for Alts like private equity and crypto. She warns advisors against investing in anything without proper vetting.
5. Shana explains that the lockup periods in investments like private equity exist for a reason and trying to find a way around them could lead to potential issues in the future. If clients are uncomfortable with the lockup period, it's best not to invest.
6. Shana believes that the current economic scenario does not warrant multiple rate cuts as many in the market are anticipating. She argues that different types of alternatives will benefit from different types of economic conditions.

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Timestamps

00:00 Introduction and Background on Alternative Investments

01:16 Access to Alternative Investments

06:45 Advisors' Interest in Alternative Investments

11:28 Crypto as an Alternative Investment

15:20 Impact of Rate Cuts on Alternative Investments

21:13 Lockup Periods in Alternative Investments

24:17 Conclusion and Contact Information

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Transcript

Cameron Howe: Hi everyone. Welcome back to the Investipal podcast. I'm pleased to have on with me today Shaina Sissel, the Queen of Alts. She's also the CEO and founder of Banrion Capital Management, which is helping advisors gain access to alternative investments. Shaina, welcome.

Shana Sissel: Well, thanks so much for having me.

Cameron Howe: I know you have the nickname the Queen of Alts - your firm is very much focused around the alternative investment space. I'm curious just to plead ignorant right now if you want to give a little bit of a background on what alternatives are.

Shana Sissel: Sure, so it's easier to define Alts by what they're not than what they are, because they're such a huge group of pretty much everything that doesn't fall into two categories. So if it's not long only stocks, or long only bonds, fixed income, then it's Alts. Everything else falls into Alts. Managed futures, real estate, commodities, all of that, hedge funds, private equity, private debt, venture capital, like literally everything else falls into the Alts category. So way easier to tell you what it's not than what it is.

Cameron Howe: Okay. So with that, you know, the traditional means you go on a stock exchange, you buy a few shares. What's the typical means in terms of how a regular individual can gain access to an alternative investment?

Shana Sissel: There isn't. So that's actually why I started Banrion There's ways advisors can, individual, even through our platform, it's not meant for individual investors, it's meant for their advisors. But there are access platforms that came out and then on the retail side, there's things like YieldStreet that exists out there that are meant to help individuals gain access to alternative product. It's somewhat limited. The access platforms that are most known on the advisor side are things like iCapital and Case. There's others, I think, like Vivaldi. There's a number of them. Alt Exchange, there's a whole bunch of different options that you can potentially use to gain access to Alt. The problem is they all have their flaws. And nothing is a complete solution. But we attempted, when we started Banrion, to provide the closest thing to a complete solution we could. I don't know if maybe in the future we'll open it up to individual investors. Unlikely. One of the reasons why that's unlikely is because alternatives are highly regulated, even more regulated than traditional investments. So access is limited for a reason. The regulators don't want anybody and everybody to have access to Alts. Now that said, more and more, there are potential types of vehicles that are available to anyone and everyone that do include alternative types of investments, things like ETFs, mutual funds, and interval funds, and some closed-end funds and tender offer funds, things of that nature. A little bit difficult to trade. Most retail brokerage platforms don't love them and make you jump through hoops if you wanna try to trade them. For example, if I were to give you an ETF ticker, BTAL, one of my favorites, AGF is on our platform and you tried to trade that at your Fidelity or Schwab, you would get a notice saying that this is considered a highly complex instrument, and you'd have to fill out all these forms saying that you are a sophisticated investor, and you'd have to know the right answers to those questions because if you didn't answer every single one exactly the way you're supposed to, they would tell you couldn't trade it. So it's available, but I wouldn't say it's easy to access these as an individual, and as an advisor, it's slightly easier, but still not as easy as, say, an institution or ultra high net worth individual.

Cameron Howe: Where do you see most advisors looking towards? Like I know you mentioned before, the Alt space is quite broad. Is the typical, you know, the one I'm most familiar with would be like the PE VC space, maybe private credit. Is that typically the angle that you see advisors look towards or is it other alternatives like crypto and

Shana Sissel: Mm-hmm. Well, crypto is in there. Hedge funds are in there. I don't know why everybody ignores hedge funds, but they're actually incredibly diversifying. Probably the most diversifying of all the different options are the types of strategies you see in hedge funds that are going long short, that are investing in things that are highly uncorrelated, whereas like a private equity is equity, private debt is debt, venture capital is equity. I mean, you're still getting the kind of exposure and risk that's associated with equities in a different way. You get some liquidity differences. That is something worth noting. ALTS is a big space and I think that what we're seeing is that advisors as a whole would like to have access to a variety of options. I think it's become more and more necessary for advisors to be able to compete, to be able to have access to these things. What we haven't seen is advisors largely adopt alternatives as a way to improve portfolio performance, reduce risk. And that has a lot to do with lack of education. Even the big access platforms that are out there are somewhat limited in being able to provide advisors access to the more diversifying space and the educational components, you know, looking at the more boutique opportunities out there, which tend to be better options for advisors, not easily accessible through the existing behemoth platforms that are out there. And most of those platforms were built using institutional type of research and education, which is different than what the advisor client needs. So I think what we're seeing is that advisors as a whole would like to incorporate alternatives. They see on the surface the benefit of incorporating alternatives in client portfolios. They just don't know how. And the solutions that exist today aren't providing them with everything they need. So they're not necessarily doing it in a proactive way as a way to kind of build and grow their business and improve client relationships because they just don't know how and those platforms don't really give them the tools they need to do just that. And that's, you know, in a nutshell, why we started Banrion was to solve for a lot of those problems, to provide better solutions, more advisor focused education, research, more advisors focused solutions. And then we, I think as far as I know, we're the only place that offers a liquid alternative. So ETF mutual fund, interval fund, model marketplace in addition to a private capital access platform. So, we're trying to incorporate a full solution for advisors and their clients to be able to access Alts and take each individual client's individual situations and risk tolerance into consideration and risk tolerance includes things like liquidity.

Cameron Howe: Yeah, absolutely. So where would you say the more sophisticated advisors are getting that access? Like, are they the ones? So in my mind, like back when I was doing this more professionally, we saw a lot, I saw a lot of hedge funds essentially have to become almost quasi index managers because that was the only way to outperform the market. And I feel like a lot of them ended up getting burned in the past couple of years with the volatility switch up and they were caught off guard.

Shana Sissel: Mm-hmm.

Cameron Howe: I wonder if that plays into the role on why you're not seeing as much hedge fund activity or if you're seeing a pivot away into some of these untraditional Alts, I'll call them where like it could be like a crypto or it could be a bit more of a niche area than like a hedge fund or like a private.

Shana Orczyk Sissel: Well, I'll tell you that advisors as a whole get pushed private equity, venture capital and private debt a lot. Most of the access platforms are heavily backed financially by firms like Blackstone and Carlisle and Bain. And so they are offering their products. I always warn advisors that when these large institutions are providing access to some of these products, they're usually doing it through a feeder fund, which means the fees are higher. If they're giving access to advisors, they're usually doing so because they don't have enough institutional interests, so sometimes not the highest quality products. Again, this is not 100% every time, but just things to be cognizant of. And so advisors as a whole have looked at that space, less liquid, very limited in how many clients they can put in these types of products though, because they have regulatory hurdles called qualified investor a qualified purchaser and accredited investor hurdles, which means that your clients have to meet very specific criteria for suitability before you could invest them in any of them. And the vast majority of advisors don't have an entire book of business made up of those types of clients. And that's true with the hedge fund world as well. I would say the difference is that the hedge fund world is vast, right? So like you have those big shops like the Renaissance and the Citadels that everybody's heard of. But the vast majority of hedge funds that people would want to actually access are pretty small boutique, hundred million dollars, and generally look at the institutional space. Marketing in that space in particular is really tough. So there's rules by the SEC that say that hedge funds and private product cannot actively market themselves. So you kind of have to know where to look and be looking. So. Family offices have always been in this space. They go to the big hedge fund conferences and meet with managers and find new ideas. But the average Mass Affluent advisor doesn't really get approached by hedge funds. And if they do, it's probably for a reason. And aren't going to Cap Intro events. They're not going to iConnections. They're not going to SALT They're not going to these big alternative conferences where a lot of hedge funds attend. So it's really, you know, using the access platforms, which are really heavy in like the more capital call type stuff like private equity in particular, real estate, you know, maybe some private debt here and there. But I think generally speaking, the reason there's so many limitations is that marketing rule, right? So unlike a mutual fund, you can't just go anywhere and find this stuff. The databases for hedge funds are somewhat limiting because they're self-reporting, unlike Morningstar, which just covers everything because there's filings, right? So… And there's limitations and that's why platforms like myself and some of the others exist is in an effort to provide advisors with a resource where they can find these kinds of things, help them with due diligence. These are complicated products. Operational due diligence is extremely important. When you think about big scams in life, they're usually done through a private vehicle. And so operational due diligence becomes imperative. All of these things really do require some assistance from someone who knows the space and that's what we offer our advisor clients. We offer a curated list of products that we've done our operational due diligence on that we know wants to work and is dedicated to advisors and has people on staff that are there to support advisors. I think that's an important caveat. Most of the bigger firms, they don't have dedicated advisor staff, support staff. They just don't. They have support staff that's used to supporting institutions, but not advisors. Um, so we really look for those who are dedicated to the advisor market, can support the advisor market. We curate the list, we do all the due diligence, provide you all the information you need, answer your questions, provide you the educational resources and research that you would need to make informed decisions and how to allocate for your client.

Cameron Howe: Okay, so outside of that world, let's say you don't wanna have to go through all that operational due diligence. Is there a world where you're seeing crypto become a bigger part of the alternative ownership for an advisor's practice, like them getting access to Bitcoin or Ethereum or some of these ETFs that just came online?

Shana Sissel: We've certainly seen more dedicated resources just to crypto, but I would argue that you should be doing just as much operational due diligence on crypto as you do with anything. You know, um, I always like to tell people and especially advisors, you know, the firms I'd want to work with if I were going to do crypto is a firm like Bitwise. Why? Because there's lots of other firms that have a Bitcoin ETF, but why Bitwise? Well, because Bitwise started by Matt Hogan and some folks that already understood and had worked with advisors before, built the platform for advisors, research for advisors, operational due diligence for advisors, products for advisors, supporting advisors. And so like Bitwise was built with the advisor in mind where some of the others were not, not dedicated to the space either. Like BlackRock's not dedicated to crypto, Bitwise is. And so, you know, I look at it kind of from that perspective. I would argue that you should be doing operational and investment due diligence on any investment you're doing at the minimum you should be asking, going to Morningstar, reading their research reports. If you use a TAMP, using the TAMPs research reports. If you already use Banrion and want to use our alternative research, we do research on our 40X products just as much as we do on our private products, so it's like I would argue in the crypto space you should even be doing more so because there's .. Have we learned nothing from FTX and Binance and all these other firms, like, of course, you should be doing your operational due diligence.

Cameron Howe: I guess if you're buying it through a fund, if you're looking at like owning it with through a cold storage, like through your own token management, whatnot, then it should be a bit of a lesser concern to that advisor, right? But then you have the whole cybersecurity aspect on making sure that you're keeping that safe for your clients.

Shana Sissel: Oh yeah, I mean, the funds obviously make it more accessible, but we do due diligence on ETFs for a reason. And there have been ETFs that have blown up. There have been mutual funds that have blown up for fraud. These are not out of the consideration. You always should know what your risks are operationally and investment-wise. I would argue most of the Bitcoin ETFs are pretty much all the same. We can discuss fees or execution. So it really comes back to who's going to be your best partner. But again, I am not ever going to suggest that you should not do due diligence on anything ever. Like never. I'm never going to suggest that. So even if it's an ETF or mutual fund, I spent half my career doing due diligence on just those things and making decisions as it relates to like just repeatability, how does it fit, consistency. Again, Bitcoin ETFs are all kind of the same. They all invest in the exact same thing, the exact same way, and it really just comes down to fees and execution. But I also would argue support becomes a bigger issue there too. But again, you should be doing due diligence on any investment you make. Period. End of story.

Cameron Howe: Absolutely. Yeah. Okay. So, you know, we're seeing the crypto market have a nice rebound this year. There's also expectations of several rate cuts into 24. You know, we saw if we rewind a little bit, the equity and debt market started trading in parallel. They, you know, became quite highly correlated, which you could see the massive need for alternatives where you get that uncorrelated. What's your view in terms of, you know, then the remainder of F24 and into F25 with, you know, more rate cuts on the horizon? What alternative investments do you think will benefit from that? What alternative investments do you think will have a little bit more of a difficult time?

Shana Sissel: So I would push back and say, I don't see as many rate cuts as the market does and that a lot of people are anticipating because rate cuts are kind of what come when demand is under control, inflation is under control and the economy is growing at a reasonable pace, but not too fast. And none of those things are true right now. So like in my head, all this talk about multiple rate cuts this year seems a bit premature when you have three and a half percent, four percent GDP growth, inflation is actually ticking up, not down, jobs, labor markets are still tight and the stock market's going through the roof. This is not a scenario in which a rate cut makes sense to me. That said, as we started off the discussion, ALT is a massive universe of things. So at any given time, different types of ALTs are going to benefit from different types of economic conditions. So for example, if rates do come down and we manage to avoid any sort of recession and we have this soft landing and the economy is just chugging along, that's an environment that's positive for things that are more risk. So crypto, venture capital, private equity, distressed debt, those kinds of things. Those things are sort of that risk on trade. They're correlated with strong equity markets.

Cameron Howe: Mm-hmm.

Shana Sissel: And so those things would benefit in that environment. Should the opposite be true and we're higher for longer and rates remain high, private credit can be really interesting in that kind of environment. Rates are high, but if the economy is doing okay and we still manage to continue to avoid a recession, that could be good for taking on more credit risk and getting paid for that risk. So that's another example of things that could do really well. You know, if you think we're gonna hit a recession, if you're concerned about downside risk, there's all kinds of options in that market. You have your market neutrals, you have long short equity where you can reduce your exposure to risk in the equity markets, but not eliminate it completely. You have managed futures, which tend to be wholly uncorrelated to the stock market. Global macro is like beta zero, so they can zig and zag at any given time and do well sometimes when markets are up. But they tend to do really well when markets are down. So, you know, this is a huge group of things. And then there's always the opportunity that you can match alternatives with client passion. So you can invest in wine and sports rights. You know, we're talking to a firm right now, Kaz Investments, about joining the platform. And they have this amazing sports rights fund where client can invest and get fractional interest, ownership interest in one of their favorite sports teams. You know, that aligns with passion. There's opportunity to align with, you know, their goals and values too, like microfinancing opportunities in specific markets and underserved communities, opportunity zone and real estate, all kinds of ways that you can use ALTS and all kinds of opportunities regardless of economic conditions.

Cameron Howe: Okay, very interesting. And are you seeing with that a, you know, in my, in my mind, if I'm a tradition, I'll call it a more traditional advisor. Um, it's been very bullish in terms of equity exposure for a while. Now we're in with interest rates back at an elevated level. You know, the 60 40 portfolio is, is back in place, so to speak, where I might be more willing to put assets back in my client's assets back into fixed income. Are you seeing flows wise, regardless of actual performance, are you seeing flows wise advisors position back into fixed income? Are you seeing them still quite interested in the Alt space or in the equity space?

Shana Sissel: Well, I think you can do fixed income and Alts. No, I think advisors as a whole are starting to see the benefit of Alts and not looking at it as like blowing up the 60-40, but just evolving the 60-40 and including Alts as part of it. And I think that, you know, that is the wave of the future because access and availability is now paramount and you can invest in these types of products, whereas even 10 years ago, it was really hard. So I think that just really makes the case evolving the way that we allocate client portfolios and not necessarily saying 60-40 is dead or you shouldn't be in fixed income or you shouldn't be in equities, but simply finding new and innovative ways in which you can control the risk profile of a portfolio while still gaining all the benefits of fixed income, of equity, and then understanding the role alternatives play. I argue this all the time. Just because it's an Alt doesn't mean that it should be in an Alt's allocation.

Cameron Howe: Mm-hmm.

Shana Sissel: So private equity is equity. So if you're gonna make an investment in private equity, that comes out of your equity portion of your 60-40. I say the same thing about private credit, right? It's still credit, it's still fixed income. So if you're gonna make an allocation to private credit, it should come out of what you would have allocated to fixed income. The Alt allocation should really be those more diversifying things like managed futures and real estate, some commodity, market neutral, some of those more hedge fund type strategies kind of fall into that bucket. So, thinking about where Alts fits is interesting, but you can have a 60-40 and have Alts exposure by including those types of products I just talked about, which are basically coming out of your equity and fixed income allocations as it is.

Cameron Howe: So final question with that in mind, if there are advisors who are interested in the alternative space, particularly in the fund side, are you seeing more funds move away from these extended lockup periods where that liquidity concern you brought up before comes into play and I might not want to throw my money because I can't redeem it on a regular frequency?

Shana Sissel: No, that's not gonna end and it's not gonna end because structurally it can't end. In fact, I would be very, very suspicious of anything that started to reduce the lockup periods on things that should have lockups. So when we think about private equity, why is there a lockup? Because there has to be a monetization of the investment at some point and that requires good IPO markets, that requires mergers and acquisitions. There is no timeline for that. You can't say, oh, you can have your money in two years. You have no idea if you'll be able to monetize the investments in that portfolio in that amount of time. There's capital calls. You may not even in two years have something to invest in. You know, that's the whole point. So I would be extremely suspicious of anything that says, oh, why you don't have to have lockups or I'm going to reduce lockups. Your lockups should match the underlying investment you're investing in. And if you're not comfortable with it, then don't make the investment. Don't try to like get around it in some other way or some other vehicle thinking that this is the magic bullet to avoid locking your money up. At the end of the day, if it's getting around to the lockup period, it's because it's doing something that's not aligned with the way that the underlying investment works. And so like even interval funds, which make venture capital private equity available to the masses, super illiquid, even more illiquid, I would say than some of the lockup funds. And a lot of people don't understand that the way that interval funds work is that only a percentage of the funds assets at any Time can be made available For redemption and it's a very small pool and it's never gonna be I need my money tomorrow and give it back to me Whereas in an LP fund like a cap call fund of private equity. There's a secondary market and it's a pretty robust one where if you really were in a distress situation and you needed to get your money back, you could probably sell your interest in that fund to somebody in a robust secondary market. Interval funds way harder and much more restrictive in that sense. So I would caution anyone from saying, oh, I don't wanna invest in this based on these lockups. The lockups are there for a reason. If your client's not comfortable with it, that's a perfectly acceptable reason for not investing.

Shana Sissel: But the answer is not to find a way around the lockups. The lockups are there for a reason. These types of investments are not suddenly more liquid.

Cameron Howe: Okay, yeah, that's a very good point. Okay, Shana, with that, you know, I think you raised a lot of interesting points on the alternative space. I know you're quite active on Twitter. If there's anyone listening to this, they want to get in contact with you or listen about your thoughts. How can they do so?

Shana Sissel: Well, of course you can find me on Twitter, @shanas621. I wish I had something more interesting, but I've had that handle forever and I can't change it even if I wanted to at this point. I'm also on Insta...

Cameron Howe: Queen of Alts isn't available? Queen of Alts?

Shana Sissel: Well, it is, but if I change it now, like I've had that handle since 2009. I can't change it. Then all my old stuff goes away and people don't know how to tag me and then they gotta find me again.

Cameron Howe: Fair. Yeah.

Shana Sissel: So @shanas621, I'm on Instagram Finance Queen 2020. You can find me on LinkedIn. And then of course, you can go to Banrion’s website. If you're an advisor and you're interested in learning more, we just launched our tech platform. There's an opportunity to get a trial and we'd love to talk to you and show you a demo. We think we've really built something game changing and we'd love to introduce you to it.

Cameron Howe: Okay, wonderful. Yeah, we'll leave a link in the show notes.

Shana Sissel: Awesome. Thank you so much.

Cameron Howe: All right, Shana. Yeah, thank you. Hopefully we can chat again soon.

Shana Sissel: Absolutely.