Ryan Eisenman is co-founder and CEO of Arch, a provider of a platform that helps family offices track and manage alternative investments. He discusses the benefits of alternative investments and the challenges of managing them:
Why are family offices interested in alternative investments?
Alternative investments have become a much bigger part of family offices’ allocations for their overall portfolio. They offer a lot of really good benefits: typically, higher returns, a lack of a correlation with the public markets and less perceived volatility. And sometimes they’re just generally more interesting.
These investments include funds for anything that’s not a stock or a bond: private equity funds, venture funds, hedge funds, credit funds, real estate, crypto funds and then direct investments in real estate or in private companies. Some folks will also put the real assets — their art, houses and planes and those types of assets — within the platform.
I believe it’s advantageous for family offices to have higher percentages of their assets within alternative investments so they can have longer returns over a longer period of time, especially since many family offices aren’t concerned with liquidity and are investing over the course of generations and decades.
What is challenging about managing these investments?
There are a lot of pain points for alternative investments. You get K-1s from these investments, capital calls, statements that value the investments and other updates. And a lot of these updates are locked in different portals that aren’t that easy to navigate, and each require their own username and password — it can be like going on a scavenger hunt to find the document you’re looking for.
We find especially larger family offices will often have multiple people that are going into the same portals and monitoring shared inboxes. It’s really inefficient.
Also, there’s a lot of volume. For a family office with 100 or 200 investments, you might be getting thousands of communications from your managers over the course of the year. That’s just a lot of general manual administrative work that the family office team or the principals need to manage.
There is really good, important information in a lot of these documents, but it’s hard for people to understand because of all the manual elements. And it’s not just a single person who needs to understand this information: Different folks within the family office need different pieces of information. For example, the principals may be looking for information on how their investments are performing or commentary on the market. Controllers or CFOs might need to know how to complete capital calls on time. The tax team needs the K-1s.
How does Arch help solve this problem, and are you using AI to do it?
Arch gets these documents from all the portals and turns the data into structured data. It gives folks a place they can log in to see a digital balance sheet of all their private market investments.
We’re leveraging some of the latest advances in AI to summarize information. In addition to giving quantitative information, our tool can say, ‘Your manager sent you an eight-page investor letter. Here’s the one- or two-paragraph summary of what’s in it.’ The overall mission is to help people better understand their investments. They can make better decisions while spending less time on the administrative aspect of managing their investments.
