Beyond domestic: broker/dealers and alternative investments
By Jason Lampa MBA
College Savings Bank
The failure of private placement offerings Medcap and Provident have sent sales of Regulation D products into a death spiral as the lack of competence among independent broker/dealers and their due-diligence teams were exposed for not discerning which products should be approved or denied for use. The neat thing about capitalism is that there will always be entrepreneurs that will recognize a problem and provide a solution.
Regulation D is the most popular form of private placement offering. Often, this form of private capital investment does not need to be registered with the Securities and Exchange Commission. Moreover, it is an excellent solution for emerging enterprises to raise capital.
The legitimate use of these private offerings has been eclipsed by the ill intent of commission junkies looking for their next monetary high.
The failure of private placement offerings Medcap and Provident have sent sales of Regulation D products into a death spiral as the lack of competence among independent broker/dealers and their due-diligence teams were exposed for not discerning which products should be approved or denied for use. (A long list of B/D firms approved both Medcap and Provident to be sold by their financial advisers).
The neat thing about capitalism is that there will always be entrepreneurs that will recognize a problem and provide a solution. Enter the Prohaus Group.
The Prohaus Group is a team of financial research specialists, dedicated to helping financial firms and their professionals make competent decisions pertaining to alternative investments in traditional and emerging markets, respectively.
Founders McKenzie Slaughter and Darell Austin recently launched Beyond Capital Markets, which is an alternative investment research firm. BCM focuses on bridging the gap between global alternative investment opportunities and U.S. investors through educational and primary research reports.
The ability to solely focus on alternative investment opportunities, especially those in emerging markets, provides us with a solution to fix the current due diligence issues in the broker/dealer community. If investments were first vetted by disinterested parties, it is my opinion that the quality of investments sold to the end-user would significantly increase.
"Currently, we're seeking strategic partnerships with established companies and startups in the broker/dealer community within financial research, alternative investments and technology firms that aid in the transparency," said Slaughter, who is responsible for implementing the company vision and managing the day-to-day operations and research development needs for the firm and global partners.
Some of the investment strategies Beyond Capital Markets is covering include:
- Private equity in Romania
- Private equity in Poland
- Financial advisers offering hybrid alternatives
For those not familiar with performing research in the private equity space, the time and effort necessary to provide relevant reports is intense. Broker/dealers and RIA firms simply do not have the time to perform this level of research while also building a wealth management business.
Independent third-party research firms that focus on private investments will continue to grow in importance as firms realize they lack the resources to get the job done.
What I find most impressive about Beyond Capital Markets is their willingness to collaborate and create partnerships with other firms. They actively look to form alliances with global financial institutions and research organizations whose primary focus is alternative investments. They understand that these partnerships will help establish a unified voice for independent, third party research in financial services.
It is refreshing to meet a group who understands the importance of collective genius rather than the cut-throat competition often seen in this industry.