MESSAGE FROM THE PRESIDENT: July 2017

Jul 11, 2017
Frederick Baerenz

Jim Ortlip and I just returned from three days of due diligence in New York City. Having been a proponent of the Endowment Model for regular investors for almost twenty years, it has been interesting to watch how much the investment landscape has changed. Twenty years ago, many institutional managers such as Blackstone, Apollo, Kohlberg Kravis Roberts & Co. (now KKR), Cantor Fitzgerald and Carlyle depended on pension plans, endowment funds and sovereign wealth funds as clients. High Net Worth Families could access the funds as well, so long as they could meet the minimum investments for each fund that often require $5 Million or more. Now many of these managers that in the past catered only to vast wealth, are seeking the opportunity to invest for people of more modest means. Just last week Blackstone, which has lead the way in this transition, announced that over the next several years they expect that 50% of the assets they manage will come from retail investors. One would hope that the inclusion of these world class asset managers will both improve the performance in this space, and provide a more competitive fee arrangement to the further benefit of investors.

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There are material differences between the terms under which endowments and individuals can invest in alternative investments. These differences include, but are not limited to commissions and fees, conflicts of interest, access to investment opportunities, size, investment time horizons, and the ability to tolerate illiquidity. There is no standard or exact definition of the endowment model. Portfolio design, specific investments and ultimately performance vary considerably among endowments and investors. Kalos does not claim that any investor will achieve the same result as any endowment, institution, or other investor. Kalos’ Investment Adviser Representatives have a conflict of interest when they recommend securities where they earn a commission as Registered Representatives of Kalos Capital. We address this conflict by disclosing the fees and commissions related to the investments recommended to our clients. Also, Kalos representatives do not earn both advisory fees and brokerage commissions on the same assets.

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