See Important Disclosures at the end of this article.
With nearly 30 years of experience in financial services and the investment management industry, Jeff Welday has both witnessed and contributed to meaningful innovation within the wealth and investment management space. His experience in business development, product management, and private market investments at firms such as Morgan Stanley and Invesco helped him develop a deep understanding of how investors, asset owners, and allocators of capital with varying degrees of sophistication interact with the financial markets. Joining Beneficient, however, presented a new challenging goal for Jeff and his colleagues: launch a business, educate investors, and develop a robust business pipeline for a largely untapped marketplace filled with potential customers who at that time didn’t know that the products and services offered by Beneficient even existed.
In a recent interview, Jeff described how he and his team are boldly and enthusiastically shaping and embracing Beneficient’s mission objective to democratize a portion of the $11.9 trillion1 global alternative assets industry, and how the company is addressing an estimated $50+ billion2 unmet annual market demand for liquidity through its distinctive business model and proprietary methodologies and technology.
A Large and Growing Underserved Market
Whenever I speak to someone about Beneficient – whether they are prospective customers, future partners, or potential counterparties – it’s critical that we start with why Beneficient exists before describing our special platform and services.
As of September 2021, the global alternative asset investment market was estimated to consist of $11.9 trillion of assets under management (AUM). That figure has grown from $0.9 trillion in 2003 at a 14.5% compound annual growth rate (CAGR), much higher than traditional strategies which grew AUM at an estimated 6.4% CAGR over the same period, based on estimates from Preqin and Boston Consulting Group.3
In response to this surge in demand, more and more firms successfully focused on creating or democratizing alternative asset investment products, vehicles, and platforms that attracted mid-to-high net worth (MHNW) individual investors and small-to-midsize (STMI) institutions. The result of this trend is that these investors and institutions now hold over $2 trillion in alternative net asset value (NAV) in the U.S. alone.4
At the same time, and to our knowledge, no firms have brought to market scalable, tech-enabled, solutions that complete the democratization of alternative assets whereby investors of all sizes benefit from enhanced trust and custodial services, more robust reporting, and early exit solutions for their alternatives, all from a single provider and platform. Beneficient was created to deliver these capabilities to the marketplace as a solution for what we identified early on as a market primed for reinvention and significant growth.
Exiting Alternative Assets: A Growing Issue for Beneficient’s Target Market
The market for liquidity from alternative assets – commonly known as the secondary market – is not new. In fact, large institutions have benefited from having access to liquidity from the secondary market for over two decades. The secondary market has grown from over $35B to $130B5 in annual transactions over the last decade, demonstrating the need and demand for early exit solutions. However, unlike larger institutions, individual and smaller institutional investors have not had the same access to, or benefit from, the secondary market. We believe this is partly because the current secondary market is inefficient, complex, costly and generally not built to serve MHNW individual and STMI investors who do not have the time or financial resources to engage in prolonged, complicated transactions.
Beneficient is focused on truly democratizing the landscape for alternatives and allowing investors of all sizes to potentially realize solutions when they’re needed, wanted, or simply when it makes financial sense. Accomplishing this ambitious mission at scale, however, requires a complete reinvention of how investors think about exiting their alternative asset investments. It requires removing some of the more arcane and antiquated elements of the traditional secondary market through technology and newly passed legislation.
As Beneficient developed its go-to-market strategy, we actively engaged the marketplace to ensure our strategy was fully informed and reflected what our target customers demand. It became apparent that, to be successful, Beneficient needed to deliver certainty across three very important dimensions: price, cost, and time. To date, in our view, exit providers haven’t been able to meet MHNW and STMI investors’ expectations in these areas. Beneficient, however, has created a platform that we believe addresses these issues head on.
- Price: We deliver a non-negotiated proposal to sellers with full transparency as to how the value was determined.
- Cost: We include any related fees within the proposal provided to sellers, thereby eliminating any additional out-of-pocket fees, expenses, or post-closing adjustments.
- Time: We strive to close all transactions within 30 days or less, and in some cases can close in just a few days when Ben is already a Preferred Liquidity Partner.
In addition to these fundamental marketplace expectations, Beneficient also realized that in order to operate at scale and serve the entire industry, we needed to reinvent the platform. We knew we needed to focus on three primary areas of differentiation.
- Regulated fiduciary: Through the Technology-Enabled Fiduciary Financial Institutions (TEFFI) Act in Kansas, Beneficient Fiduciary Financial, L.L.C. is a regulated fiduciary able to provide financing, custody, and trustee management services to investors and managers.
- Tech-enabled: Beneficient is striving to expand access through its meaningful technology developments, including AltAccess, which leverages proprietary digital technologies to deliver a straightforward online experience for investors who hold alternative assets, all in one tool.
- Rapid, Secure, Online: Through technology and a new regulatory framework, Beneficient is dedicated to ensuring all investors have access to rapid solutions through a secure and trusted process.
Educating the Marketplace on Alternative Asset Exit Solutions
To ensure that Beneficient becomes relevant to the target markets that we have been built to serve, we have created a team and aligned resources to specifically focus on three very important channels of originations for Beneficient: Wealth Managers, Fund Sponsors, and Direct-to-Investor.
- Wealth Managers. As MHNW investors continue to add alternatives to their portfolios, Beneficient seeks to partner with advisory platforms and service providers like broker-dealers, RIAs, private banks, and alternative investment marketplace platforms to provide access to our platform as a turnkey, private-labeled experience. As a trusted partner, Beneficient is helping wealth managers expand their toolkit and product set with existing alternative investment clients as well as helping with client acquisition, asset aggregation and increasing allocations to alternatives.
- Fund Sponsor. General partners are often at the forefront of client transactions through their fundraising efforts and limited partner interactions. Beneficient has a dedicated team delivering the company’s solutions and services directly at the fund sponsor level, to help ensure general partners and their limited partners have products and services at their fingertips.
- Direct-to-Investor. Beneficient has created various proprietary tools and patent-pending technology giving investors the direct ability to unlock the value of their alternative asset investments without the involvement of intermediaries.
Another crucial source of demand for our services is generated through Beneficient’s Preferred Liquidity Partnership (PLP) program. Through our PLP program, wealth managers and fund sponsors of all sizes and varieties can leverage Beneficient’s technology and IP through enterprise engagements. Our PLP program creates a significant source of potential early exit solutions for our partners and allows them to utilize and deploy our platform to their advisors, clients and investors through an elegant, seamless, turnkey, private-labeled experience. Beneficient has recently had strategic partnership conversations and agreements with a variety of customers across the wealth and general partner landscape on introducing liquidity to the marketplace through the PLP program.
From Alternative Asset Acquisition to Early Exits, The Ben Way Enhances the Customer Journey
If there is one word for how Beneficient strives to differentiate itself from the traditional secondary market, it would be “simplicity.” Consumers demand that friction be removed from their lives. We see that in all aspects of consumer behavior. There’s no reason why that principle of customer experience shouldn’t apply to obtaining exit solutions from your alternative investments.
Beneficient is delivering a specialized service that our target market has never had access to before. We built our systems and client experience with the end customer in mind knowing they would demand an intuitive, easy-to-follow, quick, and regulated process. In short, as frictionless a customer experience as we could make it.
Through AltAccess™, our customers engage in an online process where most work involves a simple dragging and dropping of fund and investor documents and filling out standardized, plain-English forms and agreements through Docusign. AltAccess attempts to simplify the process from start to finish and empowers our customers to initiate, manage, and complete requests through the industry’s first online portal of its kind. Beneficient takes pride in our goal to deliver exit solutions in 30 days or less. While timelines may vary, we never compromise our customers’ safety, soundness, and security.
Perhaps even more important is that Beneficient is a regulated fiduciary. Through the TEFFI Act, we serve as a fiduciary to the exit structure, with the goal of better aligning our interests with our customers’ interests. Customers also benefit from having increased transparency throughout the entire customer journey.
The Industry Democratization of Alternative Assets is a Journey
Beneficient commissioned an independent, statistically significant, nationwide survey of 600 MHNW alternative asset investors on their attitudes and preferences toward alternative investments. The findings from this survey were made public through The Ben Liquidity Report™. Of the dozens of observations coming from the survey, the most staggering was that 100 percent of respondents indicated interest in a rapid and cost-effective approach to getting liquidity from their alternative investments.6 Of equal interest was that 82 percent of the respondents had sought liquidity from their alternative investments once or more in the last five years.
Alternatives are a high growth asset class, and the MHNW and STMI investor segment is growing as well. Couple this with an increase in allocations to alternatives, and the demand for liquidity is primed to accelerate even further.
Still, MHNW and STMI investors sometimes hesitate to invest in alternatives given long investment lockup periods and other historic barriers. By educating these investor groups and their advisors, Beneficient can help wealth managers and fund sponsors drive more business to alternative investments while also contributing to a more efficient industry by ensuring these investors have access to what we believe are rapid and cost-effective options.
As our founder and CEO Brad Heppner likes to put it, the industry is only partially democratized. Access to alternative investments is one leg of the stool. Liquidity is the next most important leg, followed by other services such as custody, data and reporting. By creating a more efficient market, Beneficient strives to create a level playing field for its customers who have traditionally been underserved while also helping the industry reach its full potential through true democratization.
Important Disclosures
Subject to Qualifications
Liquidity exit strategies offered may not include all options and may vary over time; all exit options, including historic options such as cash, may not be available or offered to prospective customers at any given time; your options may differ. Exit options are presented on a case-by-case basis in Beneficient’s discretion and may be offered for less than current net asset value based on a variety of factors, including asset-specific factors such as Beneficient’s valuation analysis. References to “liquidity” generally refers to an opportunity offered by Beneficient to exit an investment in an illiquid asset. Beneficient can discuss with prospective customers what options may be currently available, including based upon the specifics of such customer’s situation and illiquid assets.
As the context dictates, Ben or Beneficient generally refers to Beneficient, a Nevada corporation, and its subsidiaries and affiliates, including Beneficient Fiduciary Financial, L.L.C. Jeff Welday is the Global Head of Originations and Distribution for Ben as well as the President of Beneficient Securities Company, L.P., an affiliated broker-dealer registered with the Securities and Exchange Commission and various states and Member FINRA/SIPC which provides certain securities brokerage services to and on behalf of Ben.
These materials are provided for illustration and discussion purposes and are not intended to be and do not constitute financial, tax, legal, or investment advice or recommendations, an offer to sell or exchange, or the solicitation of an offer to buy or exchange, any securities. Offers to sell or purchase any specific security can only be made through definitive offering materials and/or agreements. The information herein is as of the date indicated, is summary in nature, is not complete, is subject to change, and does not contain certain material information about Ben. No representation or warranty, express or implied, is made as to the accuracy, timeliness or completeness of any information contained herein. Investments involve risks and are not suitable for all persons. Author opinions do not necessarily reflect the views of Ben. Prospective customers are encouraged to consult with their financial, tax, accounting or other advisors to determine whether Ben’s products and services are suitable for them.
No assurance can be given that a Beneficient liquidity option may over time be successful or more advantageous, that a customer’s objectives will be achieved, or that a customer will not incur losses. The information contained herein does not purport to be complete or to cover all the information or risk factors which a customer may need to reach a decision, and it does not take into account the specific investment objectives, financial situation, sophistication, investment experience or particular needs of any specific customer or type of customer. Past performance is not indicative of future performance.
Liquidity options are subject to a wide variety of business and market risks and other considerations.
While the third-party information provided is believed to be accurate and reliable, no independent investigation has occurred. Reports and survey results may change over time. These materials include various statements, views, and information that are forward-looking or non-factual, including from third parties (collectively, “Statements”). Such Statements constitute only subjective views, beliefs, outlooks, estimations, opinions or intentions as of the dates shown, and are subject to change due to a variety of factors, including fluctuating market and business conditions. These Statements should not be relied upon and are subject to significant business, economic and other uncertainties, known and unknown risks and contingencies, many of which cannot be predicted or quantified and are beyond the control of Ben. Future evidence, events and results could differ materially from those set forth in, contemplated by, or underlying these Statements. In light of these risks and uncertainties, there can be no assurance or representation that these Statements are or will prove to be accurate, timely or complete in any way.
