ALL ABOUT ALTO
What is Alto doing, and for whom?
March 8, 2024
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Alto connects investment-minded retirement savers with issuers of alternative assets to give both sides opportunities and benefits that they can’t access via conventional channels.
The Alto team believes in the immense potential of alternative assets to transform investors’ financial trajectories. Yet, we saw the complexities and inaccessibility on both sides of the aisle: for issuers and everyday investors saving for retirement. We wanted to address them simultaneously, so everyone could benefit.
Years later, Alto has successfully helped tens of thousands of investors and over 2,000 issuers facilitate their alternative investment deals — and made a notable impact in their daily lives.
Just ask Scott Harrigan. As CEO of Alto Securities, he regularly works with asset managers who tell him stories like this. Scott recently sat down to explain what Alto is doing to change the alternative investment process — for consumers and securities issuers alike.
“I usually go to work to make rich people richer, but Alto changes that narrative. With Alto IRA, everyday people, like my own mom and dad, can participate in alternative assets, which is something they never could have done before.”
Scott Harrigan
President, Alto & CEO, Alto Securities
What Alto does for everyday investors
Alto is a platform that connects and facilitates alternative investment deals between retail investors and issuers of private securities which, until recently, have been out of reach.
With an Alto IRA, you can allocate retirement funds to alternative investments, including private equity, farmland, venture capital, private credit, real estate, fine wine and rare spirits, securitized items like precious metals, collectibles and artwork, and yes, even more.
Alto gives regular, everyday people the ability to invest in alternative assets by:
Let’s take a look at each step.
Educating consumers about alternative investments
Sourcing alternative investment opportunities that meet Alto’s high standards
Streamlining the investment process for both investor and issuer alike
Alto educates investors
Alto helps everyday individual investors through ongoing stewardship and evangelization of the access they now have in alts, which were historically reserved for ultra high net worth individuals, and pros like hedge funds, venture capitalists, and wealth managers.
For example, consider age as a historical hindrance. As Scott explains:
“You’d think that more mature investors have a leg up in terms of their experience with these assets, but that doesn’t prove true based on the surveys we run. The younger investor is in the same boat as the older investor: If they haven’t had prior exposure to alternative assets, they’re both starting from the same point.”
If you’re in your twenties, you can start learning about this increasingly popular way to diversify your portfolio and potentially mitigate the risk that comes with putting all your funds in one investment vehicle.
“You’d think that more mature investors have a leg up in terms of their experience with these assets, but that doesn't prove true based on the surveys we run. The younger investor is in the same boat as the older investor: If they haven't had prior exposure to alternative assets, they're both starting from the same point.”
Scott Harrigan
President, Alto & CEO, Alto Securities
On the other hand, it may feel that you’re too far along in your financial journey to reap the benefits of alts. But at Alto, we believe that it’s never too late to look into alternative assets as a way to bolster your existing retirement savings. Given that every investor’s financial situation will be unique, Alto provides a range of materials on individual alternative assets themselves, a key consideration of which is allocation strategy. This approach allows us to empower individuals with the information that may be needed for careful, individualized financial planning.
“We service both of those challenges by helping you diversify a small percentage of your overall savings, giving you an opportunity to catch up on the potential for outsized returns in the alternative asset space,” says Scott. It’s an opportunity you otherwise might not have if you only rely on public markets.
Alto curates issuers and their offerings and vets investment opportunities
Alto, through its wholly owned subsidiary Alto Securities, LLC, partners with issuers to market their deals on the Alto Marketplace. Alto turns away more issuers from the Marketplace than we allow on. Why? Because the excitement of alternative investment deals must be balanced with rigorous vetting. We need to be confident — for everyone’s benefit — that Alto brings only legitimate opportunities to this evolving alternative ecosystem.
The first way we do this is by listening intently to what investors care about. “Interestingly, we’ve found an almost equal split between the investors who are very, very focused on returns only and those that also have a passion for what they invest their money in,” Scott says. For instance: “I myself am a fan of the fine wine space, and I enjoy knowing I can invest in that.”
Alto conducts due diligence on potential deals and their leaders, looking for an aligned investment thesis, sound, ethical investment strategy and a history of reliable returns both by the firm and in their chosen market.
The due diligence process is the bedrock of Alto’s commitment to building and nurturing relationships with owner-operators so that our platform’s users can enjoy a thorough, well-informed selection process for themselves from the range of options we present.
Alto helps untangle investment processes for easier investing
The private markets are often associated with two things: greater risk-to-reward potential and complexity. Alto mitigates that complexity for individual retirement savers who want to invest their funds in alts.
The intricacy characterizing private markets may originally come from a good and necessary place. For example, regulations are usually an attempt to protect both investors and the distributors of investment opportunities. But increasing complexities can lead to friction.
First consider investment parameters. Alternatives are known for a higher barrier to entry because they have traditionally required higher capital commitments to participate. By contrast, consumers are used to using their mobile devices to quickly hand-pick a favorite retail stock and buy just a few dollars worth of ownership.
While the process requires numerous additional steps and actions beyond what an investor could experience on general exchanges, Alto’s technology makes these much more manageable to navigate.
Next, consider the complexity of the deals themselves. From the variety of steps involved in private market deals to the number of people, documents, and approvals needed, it makes sense that everyday investors would return to public markets.
Alto uses technology to streamline these complex processes, and aims to help issuers fulfill the requirements they’re obligated to with as little lift on investors as possible.
What Alto does for issuers seeking capital
Alto offers issuers multiple products that give them customized ways to raise capital from an often-overlooked source: the expansive pool of individual household retirement funds in the United States.
Over $13.6 trillion sits in Americans’ IRAs. As many fund raising teams continue to explore new and creative ways to secure capital, some are beginning to turn toward that untapped fundraising source.
Asset suppliers on Alto often consider our partnership a lower-cost and more efficient mechanism for raising capital — making it more feasible for them to explore this retirement capital segment of the fundraising marketplace.
“Issuers are looking for success, and success to them is raising capital. The cost of raising capital with a platform like Alto’s is much lower than the cost of raising capital through traditional mechanisms like large wirehouses.”
Scott Harrigan
President, Alto & CEO, Alto Securities
Alto gives issuers access to untapped IRA funds, a market trillions of dollars in size
Most issuers know that the vast majority of retirement funds are committed to public market securities. Of the $13.6 trillion in IRA capital, between $330-$440 billion of that is allocated to alternatives today. That means that around 97% is still available for allocation toward alternatives.
People have trusted the public markets to safeguard and grow their retirement savings, likely because of the widespread belief that general equities are more stable and accessible (even as their expected return rates are being questioned and disproved).
But Alto changes all that by bringing issuers together with investors.
Now, issuers can diversify their own asset distribution to a wider pool of investors than they previously realized. This new channel helps them strategize for a new frontier of capital acquisition and management.
Alto enables securities distribution by simplifying cap table complexities
Issuers are in a seemingly continual search for alternative fundraising methods. Now, they’re realizing how many individual investors are willing to deploy their retirement funds to capitalize on alternatives.
Naturally, many issuers are curious to explore how that works.
One historical barrier has been the prospect of managing a complicated cap table. Here, legal considerations are just the beginning. Once issuers begin opening their distribution channels to retail investors, they have many more stakeholders to report to, which can complicate their own operations.
“Our investment advisory arm, Alto Capital, solves this by creating something called a feeder fund,” says Scott. “That feeder fund provides access to the investors on the Alto platform, and Alto then becomes a single investor into the master fund.”
This move helps lift both the administrative and investor relations’ burden from the issuer. “Now, issuers and their management teams don’t need to deal with 40 or 50 different investors,” says Scott. “They deal with Alto individually, and that’s very attractive to them.”
“Now, issuers and their management teams don’t need to deal with 40 or 50 different investors. They deal with Alto individually, and that’s very attractive to them.”
Scott Harrigan
President, Alto & CEO, Alto Securities
What Alto does for the financial services sector
When everyday investors and issuers finally come together en masse, the entire financial services industry can evolve and mature.
At a time when 56% of Americans report that they are not on track to comfortably retire, Scott believes the private markets can shake their reputation of inaccessible transaction processing and change these investors’ financial trajectories.
Today’s retail investor can easily participate in general equities, even from their mobile devices. In a similar way, this generation of consumers is increasingly self-directing their way to high-quality alternatives — opportunities that, before, only high-net-worth individuals or institutions could access. “It’s so exciting to say I’m part of a team like Alto’s that can answer that challenge,” says Scott.
Answering that challenge involves more than just educating investors to the possibility that they, too, can participate in alternative asset classes and their opportunities. It also means awakening issuers and fund managers to two galvanizing factors:
The incredible pool of capital available to them via retirement funds.
Over $13 trillion currently resides in individual retirement accounts, and less than five percent of that capital has been allocated to alternative assets, according to Pitchbook and Prequin data.
The appetite of individuals looking to alternatives for investment targets.
Issuers and investment professionals are seeing an increasing appetite of retail investors to access investment vehicles like alternative assets. Between 44% and 58% of investment advisors say they plan to increase their clients’ involvement in the asset class in 2023.
Together, those two variables form the catalyst needed to spur issuers to find their entry point into this new market, just as investors are finding their way, too.
56%
of Americans report that they are not on track to comfortably retire
13T+
Over $13 trillion currently resides in individual retirement accounts, and less than 5% of that capital has been allocated to alternative assets
44%-58%
Between 44% and 58% of investment advisors say they plan to increase their clients’ involvement in the asset class in 2023
Prefer a shortened version with key takeaways? We’ve got you covered.
Want to learn more about Alto?
Check out the rest of this six-part series on Alto’s work and how we’re building towards alternatives for all.
