An alternatives strategy for an ultra high net worth practice

00:00 Most of the market is private. Most of the market is nonpublic. 

00:05 So if investors, especially ultra net worth investors, if they're not participating in the private markets, they're kind of missing out on literally 

00:14 90% of the equity opportunities on a global basis. 

00:20 Hello and welcome to this special episode of WPV. My name is David Kitai, senior editor at Wealth Professional. In the wake of our 2026 Wealth Professional 

00:28 Awards, WB is highlighting a few of our excellence awardees, showcasing the insights and approaches that earned them their place at the award show. Today we 

00:37 have one of the excellence awardees for the Centurion Asset Management Award for Adviser of the Year, Alternative Investments, Fain Stanner, senior 

00:45 portfolio manager and senior wealth adviser at Stenner Wealth Partners Plus of CG Wealth Management. Fane, welcome back to WPTV. 

00:52 Pleasure to be with you, David. 

00:54 The obvious question coming out of this is is why do you think you were named an excellence awardee in in this category? 

01:02 Well, I think historically candidly I've uh done a lot of alternatives over the years and done a lot of due diligence on 

01:09 alternatives. So, it's a space that I do believe I know very well. Um I used to also work with Morgan Stanley and I was 

01:17 part of their alternatives advisory board in the US. So I, you know, again, this is something this an area and a 

01:25 space that I've been participating and our team's been participating in for well over 25 years. So it's it's an area 

01:32 I think we get called upon and seen as being highly recognized in the space. 

01:38 And how given that expertise, how how do you use alts for your clients? 

01:44 Great question. I would say to try to generate alternative income streams or 

01:51 growth streams that are less correlated to the broad you know equity markets or bond markets. So you know alternatives 

01:59 you'll say okay what are alternatives? I basically classify them as anything other than the stocks, bonds, cash 

02:07 markets. Um, anything that kind of plays outside of those three buckets is considerably or considered in my opinion 

02:16 basically alternatives. It's to generate different revenue streams or income streams as well as uh to lower the volatility of an overall portfolio. 

02:27 Mhm. You've just hit on something that I've heard from a lot of different asset managers and especially alts asset managers is is that it is an incredibly 

02:35 broad category. anything that's not on public markets or cash. That's that's most of everything, Bane. So, how do you 

02:42 go about explaining the the various categories of asset classes that you're you're leading your clients into when you invest them in an alt strategy? 

02:51 So, okay. So, let's start off with this. 

02:53 When it comes to for an example the equity markets uh the stock markets for example the private equity markets 

03:03 historically right now is something to the tune of 90% of the global market. So most of the market is private. Most of 

03:12 the market is nonpublic. So if investors, especially alternate net worth investors, if they're not participating in the private markets, 

03:21 they're kind of missing out on literally 90% of the equity opportunities on a global basis. 

03:28 Mhm. That's an excellent point. I'm curious as to some of the other categories as well. How do you kind of talk through the difference in private debt assets versus versus public debt? 

03:39 Yeah. So, private debt um there's two things when it comes to private debt strategies is because they're less 

03:46 liquid than the public fixed income side. Obviously, uh there should be a risk premium and a yield premium associated with it. So, right now, you 

03:54 know, as we speak, the 10ear 10-year US bond government bond yields is around 4.36% 

04:01 as of today. Um whereas private debt instruments will be generating anywhere between 7 to 12%. So right out of the 

04:10 gate you're getting a yield advantage but you're giving up liquidity for the most part and you're you know the 

04:18 profile of the risk profile of the underlying debt is obviously higher too. 

04:21 So riskreward it's a balance of how do you generate higher rates return? Well, you've got to take on more risk and you've got to do it with less liquidity 

04:29 in the fixed income markets. You've talked about how you use these, but I'm curious, you know, your practice, and we've spoken about this before, is really focused on the high net worth and 

04:37 the ultra high net worth, and it's quite a quite a select cohort of clients. So, given the goals that those clients tend to have, how do you find an alt strategy 

04:46 serves those those client goals especially for alternate net worth investors cuz they've got, you know, more zeros in their portfolios or more 

04:55 commas, I should say. Basically, again, it kind of comes back to how do we generate returns even when the public 

05:03 markets are maybe misbehaving or more volatile. So, we're trying to give them 

05:10 a return profile that's smoother um and at the end of the day allows them to still participate. They're already 

05:18 wealthy uh by their nature as to their net worth. So getting back to them being able to handle more ill liquidity, the 

05:27 wealthier you are, the more you know, you don't have to have everything liquid, right? So whereas a million dollar portfolio is very different than a $10 million portfolio, which is very different than $100 million portfolio. 

05:36 So for you know a as you kind of move up that wealth uh curve area basically 

05:44 you're able to sustain less liquid holdings because you don't nec you don't need everything to be liquid so it 

05:53 creates more opportunities for you at the end of the day creates more opportunities for you. 

05:58 The other piece is you know when you talk about income streams coming out of this you know the tax consideration is always a piece for adviserss to deal with and especially when it comes to to high net worth and ultra high net worth. 

06:08 So how do you use alts to make sure that your client's income is has tax advantages? 

06:14 Great question. So I'd say you know on the alternative debt side that's interest income that's fully taxable on 

06:21 alternatives like covered call ETFs for an example. So ETFs that have option strategies wrapped around them that 

06:29 generates dividends but also capital gains. So capital gains is you know David or basically tax at basically half 

06:36 the rate of what interest income is. So if you can generate income on strategies 

06:43 like you know covered call ETFs you're you're basically create a more tax efficient profile especially for 

06:50 alternate net worth or high net worth investors that are tax the highest tax bracket right in Canada. So the tax alpha that comes from these types of 

06:58 strategies tends to really come from trying to blend different income streams together that have different tax 

07:06 treatment. But you can't you can't get away completely from you know the highest uh interest taxed or income tax 

07:16 treatment of interest income. So we don't we don't condone going fully noninterest bearing because you have to have more certainty inside the 

07:25 portfolio. So you you get this blend of income that's interest cap gains return 

07:32 of capital and deferred gains is really the ultimate way of doing it. 

07:37 Yeah. I've heard a lot of people use the expression of, you know, don't let the tax tail wag the dog, but at the same time, if there are ways to find tax advantage to lower some of the tax 

07:44 burden for your clients that still serves their goals accurately and it would seem like this is is a route that you've used to to achieve that 

07:52 100%. And we've got one discretionary strategy we call the alternative income strategy portfolio which has been top ranked against all the popular fixed income benchmarks. 

08:03 In you know in that portfolio it's got about 40 different holdings. Underneath those 40 different holdings is literally 

08:09 over 7,000 holdings globally. So in there we've got you know fused together a number of different types of 

08:18 strategies we want to try to give for for the income profile investor. we want to try to give them a smoother uh return profile as well. So, so again you have 

08:27 to construct it and design it in a way to bring together the attributes that's smooth the returns generate very good 

08:34 returns but again you don't go all one type of income stream. So you're absolutely right David you you can't let the tax tail wag the dog in this 

08:43 situation. You've got to design the portfolio where there is some, you know, tax leakage every year, but that's the cost quite candidly of generating a higher income. 

08:53 Yeah. I mean, it's it's the thing of you could, I guess, if you had all your money in a corporation, you could pay yourself at the lowest tax bracket and then you would have to live on an income 

09:02 at the lowest tax bracket. You know, that comes with the territory, right? Um the other piece when we talk about alts and it it comes with sort of the roll out of alts across the retail 

09:10 channel. It was often presented as almost following the the innovations of the pension fund industry and we saw you know the Maple 8 was the notorious as as 

09:20 the notorious is the wrong word but but sort of considered the innovative leaders the ones who invested in infrastructure who who bought into all 

09:27 these private market strategies and now retail channels have been given more access to halls. You know, there are the 

09:34 advantages that alts give to pension funds. What are some of the advantages that you would say alts give to to retail funds and that are unique to retail investors? 

09:44 I'd add one one thing about the leaders in the space. The one of the leaders globally was the Yale Endowment Fund by 

09:52 Swenson and then the Maple Lake kind of followed on as did Arbert and a bunch of others. So you're right, they've kind of led the charge, but when it comes to the 

10:00 retail, especially the alternate worth retail at the end of the day, it's opening up a bigger box of tools to try 

10:07 generate returns. That's ultimately what this is about. And you know, as far as the strategies, you mentioned 

10:15 infrastructure there, there's there's tremendous amount of strategies. Um, you know, there's music royalties for an example. There there's a lot of 

10:23 different strategies that you can put to bear. I think the secret is retail investors or alternate worth investors 

10:30 need to understand you're giving up some liquidity. Like you don't get something for nothing in this world, right? At the end of the day, you're 

10:37 giving up something because you're not near you're not as liquid with a bunch of these strategies. And they've in some 

10:46 cases been probably over marketed as being, you know, still liquid or, you know, semi-liquid when the reality is 

10:53 they should be presented as no, you're in this for five plus years. You should be committed to owning it for at least 5 years. And um if you're looking for 

11:02 stuff that's more liquid because you you have uh a need for the capital at some point in a year or two years, you shouldn't be owning these by candle. you 

11:11 have other liquid investors and you're going to take lower returns because of that liquidity need. So basically I I you know my message would be really 

11:19 simple when it really comes to alternative strategies you've got to take a more of a business cycle approach 

11:27 investment cycle approach where you know you shouldn't be looking to tap those particular pools or buckets uh over the 

11:35 next 5 to seven years and it's interesting you know you talk about applying these to a high net worth and ultra high net worth clientele who 

11:42 are often entrepreneurs themselves and I guess how does the the understanding of their own wealth is coming from what was 

11:49 built through again business investments that take time that take a long time that that involve a commitment of a certain period of time. How does that 

11:57 maybe help you in positioning these investments? 

12:00 That's also a really good comment and that's exactly what we try to do every day in our conversations with clients saying like when you were building a 

12:07 business or when you were structuring an acquisition you ended up you know did you did you go with variable rate debt if you bought out a business or did you 

12:16 go with a 5 10 year structure to kind of create more certainty and invariably they say well no we we would have a longerterm debt structure to create 

12:23 certainty to our acquisition I go exactly it's exactly what you want to try to do is to structure things with a 

12:30 longer fuse to them and a longer time frame and that generally that kind of the ball drops right they kind of go 

12:37 okay got it understand and I say you know when you're doing a let's say they they buy a business they do a vendor 

12:45 takeback so that's a form of structured credit or structured fixed income in essence because you're you're lending 

12:52 the money to the seller and you're off taking that and at some point you expect to be paid, right? So, there's risk to 

13:01 that underlying investor not paying. But the end of the day, if you diversify the portfolio across hundreds or thousands of different holdings, that's how you minimize your risk. 

13:11 Final question really is is for the other adviserss who are watching this and you know I guess I guess what I'd ask is how should those other advisers 

13:19 be thinking about alternatives now and how should they be thinking about them also in the context of you know the unique needs of high net worth and ultra 

13:27 high net worth clients around tax around estate and around income. That's a multifaceted question, David. I I would 

13:35 say alts are not going away. They're going to increase. Uh alts in Canada, the alts exposure on advisor books, the 

13:43 latest numbers I've heard is around 5% of books or in alternative investments. 

13:48 Pension plans basically have loosely defined probably 40 to 50% in alts in 

13:56 the US from where I worked when I was at Morgan Stanley. you know books down there advisor practices would have you 

14:02 know 15 to 20% up to 25% alts so Canada has a lot of catch up to play uh candidly in the alternative space so I 

14:10 don't expect that trend you know it'll have bumps along the way like it has on some of the gaming issues that have come out but I think for the most part if 

14:19 you're properly structured you diversify the positions for clients uh it's it's something that's going to be a mainstay 

14:26 in portfolios I think for decades uh to come. As far as how it interplays with 

14:33 you know their estate plan taxes and you know income requirements obviously if you can get higher income using 

14:42 alternatives that's potentially a very good thing as far as taxation. If you blend it properly and you mix it 

14:49 properly you're going to uh you're going to reduce your tax leakage. going to increase your tax alpha on client portfolios which is a positive things 

14:57 because at the end of the day it's what after tax at the end of the day is what really matters to to a high net worth investor as far as how it plays into the 

15:05 estate planning that's interesting because sometimes people say well if somebody passes away you know there's some 

15:13 illquidity on some things true but that's also the case with I don't know real estate real estate can take some time to unwind if they own an apartment 

15:22 building it takes some time to sell like so there's liquidity that can kind of come into an estate. I've been an 

15:29 executive unfortunately twice now in my life and you you just simply have to work through that. But I think, you 

15:36 know, none of us plans on dying soon, although it can happen. But when it comes to the state overlay to your 

15:44 investment portfolio, um obviously if you're 80, you have to think about it more uh more seriously. If you're 50, 

15:51 60, 40, you know, in that range, you're you're you're still having to invest the long term in mind. So alternatives fit I 

15:59 think in the buckets as long as it's part of an overall diversified strategy and um yeah I think it can be highly accretive. 

16:09 Mhm. Okay. That's an excellent message to end on. One that brings in so many of the themes that we've seen through the industry as as it continues to evolve. 

16:16 So all I can really say after that thing is is thank you so much for for taking the time and sharing your insights. 

16:21 My pleasure David uh as always and thank you to all of our viewers for WPTV. I have been David Kitai. Have a great rest of your day.