Bringing Transparency to Alternative Investment Data with Stacy Chitty and Henry Zelikovsky

Speaker A: Hello and welcome to Swift Chats in the Financial Services Industry, a podcast brought to you by Impact Communications, where your hosts Marie Swift and Johnny Swift speak with interesting people in the financial services industry and the financial planning profession.

Speaker B: Our podcast spotlights independent financial advisory firms,

Speaker C: allied financial services institutions and fintech companies that we think are adopting best practices

Speaker B: practices in the industry.

Speaker C: We also share our own tools and ideas aimed at helping independent financial advisors

Speaker B: throughout the various conversations.

Speaker A: Well, hello and welcome back to another great Swift chat in the financial services industry. I'm your host, Marie Swift. And today we're diving into a topic that continues to gain momentum among financial advisors and their clients. Alternative investments, and more importantly, how advisors and asset managers can access the research and data they need to evaluate these opportunities with confidence. I'm joined today by Stacy Chitty of BlueVault. Hey Stacy. Stacy is a longtime leader in alternative investment research and he has just launched a new research portal designed to bring greater transparency, usability and depth to this complex corner of the marketplace. And this, uh, solution was built in collaboration with Soft Lab. 360. I have the CEO and founder Henry Zelikowski. Hey Henry. Of Soft Lab here and the uh, collaboration. This portal is powered by a modern snowflake backed data infrastructure and that platform is intended to help advisors and asset managers more effectively analyze offerings across categories like non traded REITs, BDCs, interval funds and more. So let's get right into the conversation today and uh, Stacy, my first question is for you. What was the biggest need that you saw in the market that led to this new research portal?

Speaker C: Marie? Well, first of all, thank you very much for having me. Uh, and Henry, also, we have just enjoyed so much working with Henry. Uh, he is just a fantastic professional. Uh, and um, if it's possible, an even better person and his team. Um, so Marie, thank you for having us both on to talk about this today. It's a very important topic. Uh, it's very timely. I've been in the alts industry since 1997. We started BlueVault in 2009 and we've been collecting performance based data since 2009. We've collected that, we've manually done it. It's been. And there's no AI component to it. Marie. We manually collected all this, we vetted all of this. We're very proud of the data that we've been collecting since 2009. So 16 plus years of data, uh, Marie, on alternative investments. We don't think anyone, uh, comes even close to doing that. We don't even know Anyone, uh, uh, who makes the case that they've done that. What's changed today is I met Henry. Henry built a portal for us. So uh, in the past, although we had the data and you could access the data, it was not a good experience to be able to access the data. We started off by printing 100 page reports and they were bound and we mailed them snail mail to advisors and advisors loved them, they used them, they put them right on their desk and they had access to it. But there's just a better way to do that. And there's um, both from a technological but also an efficiency standpoint. And so Henry has built the portal for us and it's made all the difference in the world. So what does it do? Basically it provides fact based standardized performance data for the marketplace which creates so much more transparency than what we've ever known. In the ALTS world. Everyone has Transparency related to ETFs and mutual funds and stocks and bonds. But when it comes to alts, it's just not been there. And we had the data but we didn't have a good delivery system for that. So Henry has helped us do that. Marie and um, it's just, you know, it's really, we've been blessed because Henry and his team are uh, professionals. They're very creative with what they do. If they say they're going to do something, they do it. And uh, they do it in a timely manner. And we're just proud to be in the marketplace with this tool.

Speaker A: Now before we go to Henry, I have one last question for you, Stacy. What kind of alternative investments are covered today and where do you see the platform expanding?

Speaker C: Next great question. Because when you do say alternative investments, most people don't know what you're talking about. Um, probably the first thing that comes to mind, at least traditionally, is real estate. Um, and that's a big part of alternative investments. But there are so many different structures and wrappers for that and there's different strategies and there's even different asset classes today, like for example, credit. Some advisors might think hedge funds, some advisors might think private equity. What we do is we focus on real estate and we focus on credit. So it's the private real estate, private credit markets. And the wrappers for these are offerings like non traded REITs, non traded BDCs, interval funds and tender offer funds which are seeing incredible growth in the space. We've been covering non traded REITs the longest since 2009. Um, these are all public offerings. They are not traded, but they're public offerings. I think where we will venture into next Marie is starting to cover really private offerings, also non traded but private offerings. In fact uh, just three weeks ago we launched our first data set of DST uh data which DST 1031 exchange programs. That is a true private offering. Uh and uh, so we have finally gotten to that point. What we're known for is the public alternative investments are public non traded which I've mentioned those programs but I see us venturing more into the private market including oil and gas and qualified opportunity zones along with DSTs.

Speaker A: Interesting. Well Henry, let's get you jumping in here from a technology standpoint. What did Softlab 360 bring to the build that made this portal possible?

Speaker B: Softlab 360 is in a technology market of enterprise integrated computing software version we create uh, fintech and financial services based solutions with institutional knowledge of the meaning of the data, usability of the data and data gaps which often uh, require some additional integration, additional cleaning of the data to make the smoothness of data interpretation more accurate on a consistent periodic basis. Um Bluevolt had a long history of data going back to when they started the company 2009 and they've covered a great deal of um, funds uh through a uh history of the funds from the initial offering, uh while the funds raising money, closing money to offer capability to the market, um, funds that have been merged, listed, liquidated. Then there's a whole trajectory of what the information means to financial professionals who would like to invest um, assets of their clients uh into such alternative investment asset classes. We brought the understanding of what good and bad data is. We brought the understanding of what the data can be arranged like the arrangement of the data in a manner that's very granular. It's important to be able to get to the data once you arrange it, uh to do variety of services, uh, interpretation of data for semantical meaning, examination uh of any one uh metric like capital raise or redemption or distribution or total assets, um, to look into classification of funds over the period of time and that grouping and that classification is what we brought to the table and we arranged that in the data lake, large data lake that Snowflake technology allows us enables us to do. And that is very distinct uh, uh capability that I think raised awareness of the data, that's the value of the data from Bluevolt to their constituency to their marketplace.

Speaker A: Interesting. So I'm just understanding about Snowflake now. So there's a snowflake backed layer, am I getting that right? And it Helps with flexibility and scalability.

Speaker B: That's right. Uh, Snowflake is a data storage. It's a technology that allows a very effective use of uh, underlying data capacity. Data storage, it's not like works in practically all commercial clouds, uh Amazon, Microsoft Azure, Google, um, a client chooses in what area the what cloud, uh the data, the compute warehouse as the Snowflake calls it being placed. Uh, the warehouse is just a place to store data for lack of a better term right now. And arranging data in that warehouse and using the depth and width of the data, the depth and uh, extension of the data, you can use it for a number of reasons is what we brought to the table. Uh Snowflake grows dynamically. That's a benefit. You don't need to pre arrange anything. It grows as you use uh, also saves finances uh quite a bit on trying to manage your expectations of what data is used, when it's used, how much it's used. And that's what I meant earlier. With granularity we can now provide access to the data at any quarter, any fiscal period, any reporting period of any fund that is being tracked by Snowflake. And then the data layer is an ability to get to the data both of input and output accessibility from a variety of applications. Um, we ourselves built additional uh usage of the data through this data intermediary lake. We created analytical portal which is real time. Do your own analysis, look up any funds, look at any period and that data comes from Snowflake. Other uh clients can build data using the Snowflake direct access and Snowflake itself allows data sharing at the Snowflake level. So if a client of Bluevolt has its own Snowflake subscription, moving uh data from Bluevolt version uh storage to customer storage on the permission like basis, uh, is a subscription like model and allows the recipient to get the data without uh, actually Bluevolt doing any additional work on their end. Snowflake addresses that.

Speaker A: Wow. Stacy, let's get some examples of how some of your clients, whether it's an advisor, asset manager, I mean how is this being used in real life?

Speaker C: Well the way the asset manager might use it uh, would be different than like an enterprise client or like an advisor specifically for an advisor. Um, for starters they can just have um, a greater look into the market. They can see what asset managers are raising capital and while that does not tell the full story, in fact far from it. Marie, every advisor wants to know how much money the asset manager is raising in one offering or another. So they might start there but there are maybe a dozen or more entities out there that do track capital. So we're not that unique to the space when it comes to tracking capital raise and that sort of thing. What differentiates us is all the additional performance metrics, the digging into the financials of the SEC and pulling things out. So to answer your question, an advisor might say, okay, let me start with capital raise, but let me also take a look at distribution. Let me look at distribution coverage. Let me look at some of the risk layers. What's the portfolio actually made up of? How much debt are they using on the portfolio? Are they using debt in a wise way? Are they just using it to use it or they're actually getting a return on their money? That leverage contribution that you're looking for. So there's a whole host, I would say maybe three dozen metrics that an advisor would want to look at is similar to what they would look at when they're looking at an ETF or a mutual fund. It's similar, but it's different, uh, because it is an alternative investment. And remembering that the big thing to remember is that um, you can't liquidate your shares or you can't liquidate that part of a client's portfolio right away. So you do have to monitor the performance. Sure, there's redemption programs and we all have heard about redemptions over the last few months. But alternative investments are meant to be a long term investment. They're not meant to be. Use it now and the economic scenario changes. So let me go sell. No, that's not what it's for. It's not even designed for that purpose. So it's very important that an advisor understand the metrics. And all of these metrics can now be accessed through the Bluvault portal and regular, uh, updates can be looked at and tracked. So not only can you evaluate the market better, but you can compare and contrast better, you can filter better, you can make smarter decisions about asset managers based on their prior performance and how they've performed formed over the past. So uh, it's really opened up just a completely different world from an asset, uh, an asset allocation and an alternative investment perspective.

Speaker A: Interesting. So I imagine that there are always challenges in communicating these complex ideas, alternative investment data to anyone really, especially an advisor to client. Let's talk a little bit about that.

Speaker C: Well, it's a great point to bring up. Everyone refers to it as education. Uh, big word, right? Everybody uses education. But it is true. Most advisors don't know much at all about alternative investments. They just you know, hit or miss kind of thing. They see headlines in the newspaper, uh, newspaper digital, digital newspapers today, which is really unfortunate because the headlines are meant to be clear clickbait. And they don't really tell the full, complete story of, uh, the benefits of alternative investments. Also the pitfalls, but certainly the benefits. There are a lot more benefits than there are pitfalls. Pitfalls are meant to be navigated and you're aware of them, but you navigate around those and you can do that with data. But what is missing, even with advisors who have traditionally used alternative investments, because there was a lack of transparency, because there was a lack of performance data, um, there was nowhere to go to learn more. You just, if you're an advisor, you say, okay, who's raising the most money and what's their distribution? And you know, are they good people and what kind of asset class do they purchase? And that was about it. Um, and unfortunately, um, many asset managers can make a positive impression if you're looking at just those metrics. So you have to go much deeper and that's what the portal allows advisors to do. But there has to be. Everyone has to improve their game when it comes to education, understanding most of the metrics that we cover, um, advisors are not experts on those metrics. So there is a need and Bluvault is doing the best we can, but there's no way we're going to be able to cover this completely to educate advisors about performance and alt in general and performance metrics and that sort of thing. Um, but I think the first step is for the advisor to be more inquisitive about it and have that desire to learn more. Because if they're not doing that, the advisor down the street is doing that and that's a threat to their practice.

Speaker A: Well, let's talk a little bit about the benefits of better data. And so either one of you jump on in. Ah, what are the benefits of this better data? And Henry, you talked about the data Lake, let's drill into that.

Speaker B: So the benefits of better data. The general term better data, I would say historically looking for, from what we have tried to do over a number of years, um, the data always is present in any underlying application system that we in fintech or financial sector use. The inconvenience, I would say what caused the term the need for better data comes because data historically been arranged for a particular application that ever needed it and it used only narrow focus on where the data is. Over the time when we tried to use the data in other purposes, for other purposes. We find that the data did not gain enough classification, did not gain enough distinction or distribution or definition that can be useful for another purpose. So the purpose, the usability of the data. Better data comes when there is such a definition, when the data is arranged for multiple uses for multiple purposes. So for example portfolio accounting data, when we have uh, asset holdings and we have a history of asset holdings and we know when these assets were obtained and how long they've done over period of time, and when we divested those assets or acquired new assets, that information is, if it's well defined and in recent days we always try to do a better job improving on it. You can always tell where it came from, you can always tell when it originated, you can always tell how many times it was changed, what the change was, uh, and you can derive conclusions based on the history of change. Ideas come to mind, where to do it, what to do with it, what to use it. So the best we can attribute any data point any change in the data from the standpoint of an asset to what makes an asset, to how much of an asset is being held within a portfolio and then do an analysis of the size of an asset, the origination of an asset, the change in pricing of an asset or any investment in the asset. That is the quality of data we would call the better data compared to previous years. And for Bluevolt in particular, we arranged it in such a way that data is useful to always answer any question of any fund, uh, and the history of the fund and be able to draw, have a semantical explanation of the data. Therefore, the data now is capable of answering semantical, what we call semantical analysis, which parlays itself into LLM models. And we down uh, the road think we're going to be using contextual conversational AI to speak to and from this data as a conversational partner might be to allow advisors to do more and more uh, understanding of the data based on the purpose of their research. And we think this is a research facility that very much augments and improves the quality of investment decision and data. Lake is a good foundation for it. From my side, um, I think analytics often today and we did this in Bluevolt analytics. The more you have interaction capability between a person and the data and interactive dashboards allow us to do it, the more we capture feedback of the people, um, people always have a difference of opinion or different perspective of looking at the same material. So it might be useful to one advisor looking at the way the assets are, are defined and used. Might pause and Raise other questions from someone else, because that someone else has a different reason for investing into this asset. Capturing the feedback and then capturing the feedback. And the purpose of why the data was originally aligned in a particular way enables us to always improve, enables us to add a conversation. So as we discuss it now, something might come to mind to any listeners to come back to Bluevolt and ask them to use can we use the data for what we think is worth it? And we should be able to capture that discussion and continue proving analytics.

Speaker C: Yeah. Marie, let me add one thing that um, might resonate um, with your viewers. And I'll use the example of something we call statcast. And if you're not familiar with Major League Baseball, you may not have heard of statcast, but statcast is what Major League Baseball introduced to the market a few years back. And it's course it's just grown since then. But the, the number of the, the number of um, metrics that Major League Baseball now collects on, uh, well really every month of the year, but especially during a baseball game, it's just phenomenal. So not only do we track homers and RBIs and batting average, but there's so much more. The launch angle of a home run, the mile per hour speed of a runner going from first base to third base or second base to home plate. And what these Major league teams are doing. It was first demonstrated in a movie called Moneyball. Have you ever seen that movie, Marie? Moneyball. Okay, so the really smart guy figured out that he could build a team. He could build a better team. If he looked at the data, then he could just by doing the traditional things, who hit the most home runs, who had the highest average, who can steal bases. So if you think about constructing a team, there are components of the team that if you do it right, you can strengthen the hole with the parts. And, and I think that's a great demonstration of what we can do with alternative investments. By collecting the data and then looking at them, uh, as a whole, everything can improve. So what's the result? The result is better decisions. So you say, well, who are the players that make these decisions? Well, let's start with the advisor. If the advisor had BlueVault data in the past, there would have been three fewer opportunities, not there would have been fewer decisions that resulted in the poor performance that an advisor experienced and had to literally get to face to face with a client and explain that to a client or try to explain that to a client. How in the world could this possibly happen? Based on the Information that they had and what you told me, Mr. Advisor. So the data that we have that BlueVault has, the portal, can prevent those types of, uh, things from happening, those bad stories. Um, and so similar to statcast, where you can build a team, uh, an advisor can make better informed decisions. An asset manager can make better informed decisions too, because they can construct their portfolio better if they're looking at the data instead of just saying, okay, I believe in class A office, or I believe in class B multifamily. If they have all the data, not just what they want to do, but what their competitors are doing, they can better position themselves, um, better make better decisions that produce a healthier outcome, which allows them to raise more capital. And you just keep going this better data. And I'm not telling Henry anything he doesn't know, by the way. I think Henry is an engineer, a data engineer. I know some people call it science. He may call himself something else, but I think what he's done is an engineer. And an engineer just improves efficiencies in the marketplace. So, um, I think that that's ultimately what results when you use good data. And I'll just say one last thing, Marie. It's very important that you're using accurate, standardized data when you go to make these decisions. And that's what Bluvault has. You know, sometimes I go to LinkedIn and I see people talking about, well, the problem with alts is there's no standardized data. And that's just not the case. Uh, because BlueVault has that standardized data, we just had not been able to fully utilize it like we can now through what Henry's built for us.

Speaker A: Very interesting. Well, I imagine there are applications for financial services organizations of all size, from an advisor to an asset manager, or even a larger financial services institution. So if either of you wants to touch on that, um, we can go to our next question, or you can dwell on that a minute and we can dig in.

Speaker C: Okay. Yes, Marie, there's, uh, one thing we've not talked about yet. There is the portal, and the data is what drives the portal. But there's a lot of data outside of the portal that exists in a raw form that some larger institutional or enterprise types of firms can and should be utilizing. Probably the best example I can give of that is that Fidelity does license our data for their use. They really don't go to the portal to look at the portal. Maybe they do, but that's not really the main use of the licensing of the data like they do. They like to get the raw data. And they're building, and I don't know what it is, and I'm not going to say too much about it, but they're building an alternative investments platform, I understand, understand, uh, and they need that standardized, clean data in order to be able to do that. So they have trusted Bluevolt, uh, for that. And we're looking forward to seeing what they're doing because there's no doubt, Marie, that it's going to solve one of the problems in the space, which is the educational need that we have. So what they're doing, and again, we don't know what it is, but what they're doing we're all for because we have confidence that they are solving a problem in the space, but they're utilizing bluevolt data in order to be able to do that. So, you know, again, we're talking to not just financial advisors, not just asset managers of all sizes, but also some of these firms that offer services to the advisor community, but they lack the data when it comes to alts or private markets. They lack the data to be able to pull all the pieces together. So I feel like that we're solving for, uh, that need and that problem as well.

Speaker A: All right, fantastic conversation. Let's start wrapping up and go to you, Henry. Now, what's the one thing that you hope our viewers and listeners will take away from our conversation today?

Speaker B: I hope that the listeners will realize that there is a very convenient and immediate opportunity to use analysis of the underlying funds that blueworld carries and that the universal funds will continue to expand. Um, from just continued, the DSCs were added recently and the portal itself, the analytical capability to evaluate the assets, we evaluate the funds, is shortly coming with, uh, what we labeled as comparative analysis. You'd be able to compare across asset classes, uh, by metrics of your choice, which is important to you for whatever your purpose is. And you'd be able to compare funds in one asset type or one category against the other. Again, choosing idea is to enable you with very quick enough lookups and tools to choose assets you interested in and choose the assets. Uh, continue thinking that you have done the right job investing in assets you've picked and making decisions when these assets can take more investment or you would like to replace investment in these assets for something else.

Speaker A: Stacy, final word?

Speaker C: Yeah, thanks, Marie. I think, uh, two things. First of all, uh, I think it's important for those of us in the industry realize that this is not just a fad, that there's a seismic, uh, event that's occurring. Alternative investments and the need that clients have for the private markets, that's not going to go away. And the reason I say that Marie, is that in the past I've been in the industry for almost 30 years. There were many occasions where capital raised would go up one year or another, but it kind of always came back down. So most of the time maybe those were, maybe it was a result of something that happened in the economy. Okay, um, if you remember the tech bubble from the early 2000s, that kind of, that was an impetus for a few years of good capital raise for non trade REITs, that would be an example. There are other things, uh, what's going on in the credit markets, uh, for BDCs and interval funds. But it always was like a pendulum and I don't think that that's going to happen anymore. I think that the significant change that's happening is one where advisors and clients, investors see, hey, this is not just something I use on occasion. This is really an asset allocation, uh, decision that I'm making. This is a long term decision that I'm making. So first of all, I hope that advisors and others will see that this uh, is here to stay. Uh, the second thing is that um, you're not out there by yourself anymore because there are a host of services and products to support you. And that through BlueVault, we have the data to look at in a way that we've never had before. That does increase transparency. Transparency and it does provide uh, advisors with a quicker, easier, more efficient way to access performance data and make better decisions. So I hope that those are the two things that come across from uh, today's uh, talk. Marie, uh, chat.

Speaker A: Thank you so much Stacey and Henry for being here today and for our audience. Thank you for listening to swiftchats and if you found this discussion helpful, be sure to subscribe and share this with colleagues who are navigating the growing world of alternative investments. And until next time, I'm Marie Swift. Thanks again everyone.

Speaker B: Thank you. Bye bye.

Speaker C: Thank you.