I'm trying to understand why Empower would be pusing this. I can understand they need to accommodate it if there's a big demand, but they (and others) seem to be doing more than that. Are they being compensated specifically for offering alts, or are they just hoping it will get them additional market share at the same price?
From what I’ve learned, they are getting paid more if they sell Alts. One commenter on LI said:
“In my past experience in sub advisory, when a record keeer that has a sub advised fund business, I have seen 5-15bps on top of fees given to sub advisor for public markets. I’d think with alts, it could be almost double that?”
The above is anecdote/guesswork, but know this: if Empower weren’t gonig to earn more $$$ from this, why would they not just say so to Elizabeth Warren?
Empower did not respond to Senator Warren, so i doubt they will answer me. Calling out the opportunituy on the parent company's earnings call tells you everything you need to know. Higher fees means more opportunity for Empower to make $$$. Perhaps a small cut from every dollar that flows into these arrangements? Empower "controls the customer" in a sense.
And administering a fund with Alts IS more complex, so it makes sense that Empower would expect more from this. It also means that investors should be asking more questions. Two big ones would be 1. Addresssing liquidity and 2. How to handle Daily NAVs.
It’s true that firms stay private longer. The answer is not to democratize private markets but to push firms to list shares so the public markets are more robust. Open AI should not be allowed to stay private if it’s benefiting from US users but not letting them participate in their growth.
I'm trying to understand why Empower would be pusing this. I can understand they need to accommodate it if there's a big demand, but they (and others) seem to be doing more than that. Are they being compensated specifically for offering alts, or are they just hoping it will get them additional market share at the same price?
From what I’ve learned, they are getting paid more if they sell Alts. One commenter on LI said:
“In my past experience in sub advisory, when a record keeer that has a sub advised fund business, I have seen 5-15bps on top of fees given to sub advisor for public markets. I’d think with alts, it could be almost double that?”
The above is anecdote/guesswork, but know this: if Empower weren’t gonig to earn more $$$ from this, why would they not just say so to Elizabeth Warren?
Empower did not respond to Senator Warren, so i doubt they will answer me. Calling out the opportunituy on the parent company's earnings call tells you everything you need to know. Higher fees means more opportunity for Empower to make $$$. Perhaps a small cut from every dollar that flows into these arrangements? Empower "controls the customer" in a sense.
And administering a fund with Alts IS more complex, so it makes sense that Empower would expect more from this. It also means that investors should be asking more questions. Two big ones would be 1. Addresssing liquidity and 2. How to handle Daily NAVs.
It’s true that firms stay private longer. The answer is not to democratize private markets but to push firms to list shares so the public markets are more robust. Open AI should not be allowed to stay private if it’s benefiting from US users but not letting them participate in their growth.
...thanks for the comment! One potential reason firms are not going public is becuase if they did, they would be afforded a lower valuation.