Publications

- February 1, 2020: Vol. 7, Number 2

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Alternatives and the shadow of SEC scrutiny

by John Grady

Alternative investments can present significant challenges to advisory firms, ranging from structural elements to tax considerations to regulatory concerns. Not to mention questions relating to how much of a client’s assets to allocate to a specific alternative investment and to alternatives generally. And that’s all before the performance of the asset class or asset type underlying the alternative investment is taken into account.

Ensuring that alternative investments recommended to or used by firms’ clients do not present unsustainable risk levels requires firms to focus on all elements of the investment product during the diligence and sales processes. There are several ways in which firms can reduce compliance and other risks when considering alternative investments.

Due diligence is often thought of as referring to an outcome — i.e., that a product has been “diligenced.” Widespread use of the term “due diligence” in securities law grew out of its p

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