Unleashing the Middle-Class Investor to Help Close the Wealth Gap

There are a lot of things I’ve learned in the last two weeks about Alto, and the Alternative Investment market itself that has me riled up and making me sound like Bernie Sanders. I’ll get to more on that in a moment, but first a disclaimer:

This article and all of the articles I’m writing are not investment advice. I am very clearly not an investment advisor and nothing I write should be taken as such.?

A lot of my family and friends are asking me what Alto does. In short, Alto enables people with retirement accounts, those being 401Ks or IRAs (investment retirement accounts in a variety of forms), to use those funds to invest in alternative assets like pre-IPOs, securitized collectibles, music royalties, and many other novel forms of investment. In Canada, a comparison might be investing through an RRSP or TFSA.?

The problem is, the process without Alto is a nightmare that takes weeks. Forms, lawyers, custodians, drafted agreements, (FAXES!!!), but Alto translates that into a technology-enabled guided workflow that takes days instead. Alto makes investing in alternatives through retirement funds a process worth doing both financially and emotionally.?

That effort is supported by a team of experts who serve as a transactional sherpa. Alto helps makes your money move so that you can invest your retirement funds the way you want to, you do you, and Alto does as much of the heavy lifting as possible.

Now, this is where Senator Sanders comes into play. Alto, gives everyone the opportunity to invest in private offerings, many of which were only accessible to the very wealthy, or well-connected. Part of the mission is to democratize investment and this is a time when that’s needed more than ever.?

Bernie Sanders Voice: The Top 1% Of U.S. Households Hold 15 Times More Wealth Than Bottom 50% Combined.

The Federal Reserve published data that proves the above statement, and while that’s been true in the past, it also continues to trend toward inequality. Pew Research identified that the top 5% of earners continue to see their wealth grow faster than the rest of America.

My mind has been opened, and there are two things I’ve learned that are blowing it apart. Money idle is money that’s losing value, and accredited investors have a leg up, which in part contributes to the wealth gap. The wealth gap isn't just a result of decades of inaction on the minimum wage, or the increasing costs of goods, which further exacerbates it – but those – and others matter too. My concern is about something that you can feel in your bones if you are trying to make good choices for your family, Am I being screwed?

It is that question that's caused so many people to make new choices about where they work, and live, and how they live. The fact is, the middle class has been taken advantage of, and not just those that haven't had the money to save – even those that have. If your money is sitting in a bank making 2% or a mutual fund making 6%, you are treading water at best, slowly sinking at worst. Costs rise, if your rate of return doesn't, where does that leave you at the end of the day?

If the "safer" investments are slow-death – why not enable the individual investor to help fund a venture the way a PE firm might. In the past, someone might invest in these same types of opportunities through intermediaries, which extract fees that dilute the value of the investment. Sure the mutual fund is invested in one or many hedge funds, but the retail investor doesn’t get the same benefit as someone who has access to enormous amounts of capital or the right connections.?

How PE Firms Are Driving the Market

It is through that lens that I think about where the biggest players in private equity markets are playing. Think about the largest pension funds in the world, such as The Canada Pension Plan Investment Board (CPPIB). It isn’t just investing; it is straight-up buying companies and helping to run them, such as Informatica, a data management and warehousing solution, which CPPIB bought in 2015 for $5.3 billion. That’s a private equity investment that might have been an IPO offering in the past, but instead, CPPIB scooped them up and held onto the asset for 6 years without exposing the opportunity to the public. Informatica did its IPO this past October, with a $9 billion valuation and raising more than $840 million. CPPIB wins.

This is happening all of the time. To put this into perspective, every quarter there are $100–150 billion in private investments according to Credit Suisse’s 2021 Market Trend Observations. That’s a lot of opportunities that the public is missing out on, that the top 1% isn’t.

That’s where accredited investors have greater opportunities – they can invest and find these opportunities wherein John Q public can’t.

Accredited Investors Have A Leg Up: We Could All be so Lucky

For private equity investment, there is a literal ladder with a locked gate on the top of it to access the majority of opportunities. That ladder is being an accredited investor, and the locked gate is the amount of money you have to have to be one. According to Rule 501 of Regulation D of the Securities Act of 1933 (Reg. D), you've got to make more than $200,000 a year, or have a joint income that exceeds $300,000. Adding to the burden is maintaining that income for 2-years or more. Investors managing self-directed IRAs are taking control of their futures, and deserve the opportunity to prosper from the same successes and failures as accredited investors.

If we’re being restricted in the growth of salaries, and costs are rising, where can the middle class catch up?

I’ll keep in touch as I learn more, and if you are curious about alternative investing, visit altoira.com.