Since 2009, the Fed’s target overnight rate has been over 2% for just 12 months, and it is looking like it will stay that way for years to come. With many commercial banking products like money market accounts and CD’s being tied to the Fed Funds Rate and offering a lower rate of return than normal, this has forced lots of capital into equity markets.
When interest rates begin their return to normal, equity markets may not be as attractive and that can lead to poor returns for those heavily invested in the stock markets. This has created a need for alternative investments, and fintech is filling that need.
Rise of Interest in Alternative Investments
The historically low interest rate environment of the past decade has left traditional investors searching for meaningful yield but with few options other than stocks. In fact, this was referred to as the “TINA” trade (there is no alternative) by many market pundits. However, this situation can leave some investors worried, given the history of stock markets.
That is where the rise of alternative investments, those historically unapproachable by the average investor or advisor, play a role. Smart advisors can utilize these alternative investments to diversify and reduce overall portfolio risk without sacrificing on return.
Access to these alternative investment markets can separate an advisor from the rest of the pack. Fortunately, innovations in financial technology [fintech] have improved access to these markets for advisors of all sizes.
Examples of Alternative Investment Fintechs
Innovations in fintech are constantly improving access to alternative investments for businesses, asset managers, and individuals. Some of these companies provide access to liquid investments that provide a bridge between cash outlays, while other can allow access to private, long-term capital investments that have traditionally been reserved for elite money managers and the ultra-wealthy.
Below we’ve listed a few companies that have leveraged their fintech to provide some of these unique solutions:
Companies Providing Highly Liquid Investments with Competitive Returns
Our company, The American Deposit Management Co. [ADM], provides businesses and asset managers an alternative to holding idle cash. Whether you’re an asset manager with cash waiting to be deployed or if you’re a company that needs to maintain a large cash reserve, ADM’s fintech provides a valuable alternative investment offering with more competitive rates than those you can get in your local bank’s money market account.
Our clients enjoy next day liquidity for their funds with nationally competitive returns. In addition, ADM can provide access to extended FDIC / NCUA insurance far above the traditional limits on those deposits using our proprietary fintech. This technology distributes those funds into a network of over 600 financial institutions, allowing access to nationwide rates without the geographic limitations.
At ADM, we also leverage our fintech to provide a suite of business money management services. We can handle vendor payments, incoming cash from a variety of sources, business escrow services, and business consulting from our team of professionals.
Another company, called MaxMyInterest [MAX] is providing liquid cash investments similar to ADM, but for individuals. Some investments are meant to focus on liquidity and security more than wild returns. MAX provides fintech based cash management solutions that can distribute large amounts of cash throughout a network of banks in a way that not only does the rate shopping for their clients, but it also provides some of the highest security, full FDIC / NCUA insurance, and next-day liquidity for their cash.
Companies Providing Access to Previously Inaccessible Investments
The first step in alternative investing is finding the opportunities, and there are several companies working on ways to improve access to these opportunities. Since the pandemic shut down Context 365’s in-person capital introduction conferences, they have focused on developing an interface for capital allocators and fund managers to connect with professionals in the alternative investment industry. Their innovative fintech continues to broaden awareness and access to alternative investments.
Both Zanbato and InvestX are focusing on providing readily available access to pre-IPO markets to more advisor clients. Venture capital has allowed many firms to stay private for longer, and by allowing more time for the companies to develop, they are going public with startling success. The results of recent tech IPO’s, like Bumble, Roblox, and DoorDash speak for themselves, and advisors with access to these markets can pass the returns on to their investors.
Providing access to alternative investment opportunities is the key and both CAIS and iCapital. These firms can provide advisors and their high-net-worth client base with a curated list of alternative investments based on risk tolerance and diversification preferences. These investments can range from hedge funds and venture capital to private credit and real estate.
Fintech is at the heart of ADM
At ADM, we have proprietary fintech that can provide you with a robust alternative for investing your idle cash. Our team is our secret sauce, and we look forward to assisting you.
If you’re a business or an asset manager and you’d like more information about our cash investments or our other cash management solutions, contact one of our friendly associates today.