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The IPA’s Tony Chereso discusses a transformative year for the PDI industry, and the bright future for retail alternative investments.

The changing needs of the retail investor continue to serve as catalyst for significant transition across our industry. As a result, alternative investment products – and the retail distribution channels that put them in the hands of investors seeking a diversified portfolio – are evolving at a rapid pace to meet this growing demand.

Over the past two years, retail alternatives continue to gain momentum. As we close out 2018, product demand is trending ahead of last year and looks robust for 2019 across several pockets of the industry:

  • REITs have raised more than $4 billion in new capital through November and are projected to see a nearly 10 percent increase over last year.
  • We continue to see increased demand for 1031/DST products, with 2018 equity raise projected at approximately $2.4 billion – which would represent a 23 percent year-over-year increase.
  • Capital flow to interval funds continues to expand, with $8.5 billion raised through the end of September. At that time, there were 77 public interval funds, with $68.8 billion in registered shares available – a 49.4 percent increase over last year.
  • BDC sales have slowed somewhat, attributable to headwinds caused by the slow pace of regulatory modernization for the product category. However, the outlook is good next year for legislation to modernize the operational structure of BDCs and increase their leverage capacity, creating a new foundation for future growth.

New growth drivers are also emerging. Qualified Opportunity Zones (QOZ) – a byproduct of the 2017 Tax Cuts and Jobs Act supported by the IPA – have been heralded as one of the most significant economic development strategies in decades. To date, over 100 QOZ Funds have registered with the SEC representing more than $18 billion in potential investment.

Educational support for this exciting new opportunity is critical, and the IPA is proud to bring broker-dealers, fund managers, and tax and accounting experts together to address the most pressing issues at the first IPAForum – Qualified Opportunity Zone Funds in Dallas on February 12-13.

A leading voice on alternatives

This was a year of evolution for the IPA too. We introduced the new IPA – the Institute for Portfolio Alternatives. Our new name and brand reflect our commitment to leading the conversation among all audiences for the dynamic PDI industry, and we continue to shape the narrative across a multi-channel media landscape.

Importantly, we also resolved to make the PDI industry voice heard on Capitol Hill and across the 50 states. This year, IPA members held over 200 meetings with members of Congress and staff at our annual Hill Day event.  We also established the Institute for Portfolio Alternatives Political Action Committee (IPA PAC). This is the first PAC dedicated to the unique interests of PDI products and amplifies our voice with policymakers who share our priorities and support our industry’s success and prosperity.

Our strategic policy and government affairs initiatives led to important progress in 2018, including the passage of a BDC modernization bill into law, which was the first step in expanding capital access to America’s small-and-medium-sized businesses. And following the successful passage of the Tax Cuts and Jobs Act, we continue to work directly with the U.S. Department of the Treasury to strengthen and improve the new QOZ regulations.

Working with the SEC on its Regulation Best Interest proposal has been a key priority in 2018. In addition to our comment letter, we met directly with SEC Chair Clayton, the Commissioners and key staff members in the SEC’s Divisions of Investment Management and Trading and Markets. Our primary objective remains: to help establish a rule that protects investors, while also being workable for our members. Most recently, we submitted comments to the state of New Jersey that discourage the creation of a state-by-state approach to a fiduciary rule.

Finally, we are excited to welcome nine new board directors, some from new IPA member firms such as Nuveen, Blackstone and CIM Group. The depth and experience of our entire Board of Directors is a true reflection of a broad community of investment expertise, and I look forward to their leadership in 2019.

Throughout this evolution, one thing has not changed – the IPA works continuously to support our members in their pursuit of new growth and market opportunities. And with more than 30 new firms joining the IPA membership in 2018, we are more aware than ever of our responsibility to deliver the valuable content and education that you expect. This year we introduced our first RIA Practice Management Workshop, the first QOZ Forum for broker dealers, produced over two dozen webinars, hosted the OpsTech Forum, added IPA Chapters and saw record attendance at our two Due Diligence events, IPASummit & Hill Day and IPAVision.

At the IPA, we want our members to know a simple truth: our success is entirely and directly tied to your success.  We are honored and privileged to work alongside you every single day, and we have a genuine ambition to work toward continued growth and expansion of the PDI industry.

Thank you for your commitment to the IPA, and we look forward to more shared success in 2019!

Best regards,

Tony Chereso