The democratization of alts in the wealth management space has opened up the world of hedge and other private funds to wealth managers, RIAs, family offices and the like. But there's a hitch: alternatives can be opaque and hard to understand. Without standardized data and expertise, firms can be forced to forge ahead with due diligence and performance analysis without the appropriate support.

“We designed Venn to help advisors intuitively explore the risk profile and return potential of an alt allocation, empowering them with tools to make thoughtful adjustments at the home office or on the spot with clients,” says Brett Romanoff, Head of Sales at Venn by Two Sigma. Venn’s display is refreshingly modern, its results powered from a cloud-based environment and critically, it integrates with other leading platforms like Addepar.

Advisors can get started on Venn quickly: they need a basic list of a client’s holdings and performance data (available via market-leading data aggregators).

Such capabilities can prove differentiating at a crowded time when many advisors are introducing their clients to alts. With Venn, investment teams can customize portfolio composition, experimenting how allocations to alts, along with shifting macroeconomic and market conditions, can impact the delicate risk-reward equation for their clients. Managers and clients can work together to set parameters such as risk levels and exposures. And helpfully, teams can lock down model portfolios and allow read-only access to help advisors in the field stay focused on client conversations.

Under the hood, Venn uses quantitative analytics. At a granular level, Venn estimates what market forces, or ‘factors’, can drive risk and returns, be it interest rates or equity exposure. This approach can allow managers to assess alts in-house, performing analyses often found in the realm of hedge fund consultants, or that could take weeks in Excel.

Advisors can also run various ‘what-if’ scenarios. What if inflation spikes? What if there is another Covid surge? This can all be done live, so that teams, or advisors and their clients, can sit together and work out a real-time approach before deciding on an eventual course of action.

“We believe Venn can boost marketing and sales, helping wealth managers strengthen existing client relationships and unlock new ones,” adds Romanoff. Uploading a prospective client's portfolio and demonstrating to them analysis via Venn’s ‘Report Lab’ could promote client confidence. This can be especially helpful in the context of RIAs who break away from wirehouses to open their own businesses. Trying to differentiate yourself while starting from scratch can be challenging. It can be hard to stand out.

Venn also collaborates with other innovators in the alts space, including CAIS, a marketplace for alternative investments aimed at democratizing alts by empowering investors to access these investment opportunities.

In addition to alternatives, Venn is exploring ways to add newer asset classes to the Venn platform, such as cryptocurrencies. The principle is the same: clients want to know what they are getting and how what they invest in plays into the rest of their portfolio.

‘It’s a black box’ may no longer be an acceptable answer to clients about alternatives, and with Venn, it doesn’t have to be.

Figure 3: With Venn, investment teams can customize portfolio composition, experimenting how allocations to alts, along with shifting macroeconomic and market conditions, can impact the delicate risk-reward equation for their clients.

This article is from The Wealth Mosaic's US RIA WealthTech Landscape Report 2022. Access the full report here