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Video: Raising Capital from Retail Investors

The retail investment sector is an increasingly popular target for investment sponsors, big and small. How do sponsors access the retail channel and tap into the broad population of mass affluent individual investors?

Greg Mausz, chief operating officer of Preferred Capital Securities, sat down with The DI Wire’s publisher, Damon Elder, to discuss in the latest video from ADISA’s Focus on Alternatives, an educational series that covers key topics in alternative investing.

Mausz and Elder discuss how sponsors of non-traded direct investment offerings can market and sell their products through the retail channel and target the growing number of mass affluent accredited investors and retirees.

Video Transcript

Damon Elder   00:08

Welcome to another additional focus on alternatives sponsored by ADISA, the Alternative and Direct Investment Securities Association. I’m Damon Elder publisher of And today we are joined by Greg Mausz who was the chief operating officer Preferred Capital Securities.

Today we’re going to talk about what is often a vexing issue for would be sponsors and that’s how you distribute to the retail channel at least alternative investment. So, you’re an ideal person to talk to about this obviously with you’re the broad experience in the MBD channel and then the alternative. So why don’t we start by defining what we’re talking about what exactly are we talking about when we talk about the retail market in regard to alternative investments?

Greg Mausz   00:47

Sure, thanks for having me. So, retail market, we’re really talking about the mass of Fluence accredited investors. I’ll commonly call it pretend Main Street investing so not Wall Street not you know high end family offices not institutions.

Damon Elder   01:05

Ok good…and what are we seeing in the market is growing as the interest there, I mean what would we what are you seeing?

Greg Mausz   01:11

Oh, that’s Main Street markets definitely growing, there’s a couple of trends that are really driving it. Um, the two are number one demographics with the baby boomers the size they are the wealth that they’ve accumulated. And it’s managed by individual financial advisors. The other trend is the move from pension funds or defined benefit plans to defined contribution plans otherwise known as 401K So as people retire, they have this giant nest egg built up in their 401K, that gets oftentimes rolled over into an IRA. And then that IRA managed by a financial advisor and these financial advisors need to find all different types of traditional but also alternative investments to create the the right return matrix for these investors.

Damon Elder   02:04

You know, in recent years we’ve seen an entrance into the retail channel of some really significant institutional players like Blackstone, KKR, Starwood, etc. And the list is growing, so I’m always really interested in why are these institutions coming into the retail channel when we know it’s a less efficient space. You know it’s much harder to raise the capital than it is to pick up the phone and you get a few $100 million. So why are they coming into the retail channel?

Greg Mausz   02:29

Really for the two main reasons I just listed, I mean they’re following where the money is. And those defined benefit plans those pension plans they used to be able to write big checks to these money managers and manage the money but that’s not where the money is. The money is now in the hands of the mass affluent you know with the advice of their financial advisor.

Damon Elder   02:54

Gotcha, gotcha, and so you know the retail channels bit different so how do you access it if you’re interested in joining this industry how do you access the retail market?

Greg Mausz   03:04

Sure, so issuers or companies that need capital I mean they can go directly to investors and try to explain the story, that can be costly and inefficient as well, but you can go through financial advisors. And you explain the products and market the products to financial advisors they meet with their clients if their client objective aligns with the product objective whether it’s growth or income or alike then the financial advisor can make that recommendation to the client. So…

Damon Elder   03:40

What’s the attraction to the sponsors, why should they be entering the retail channel or why are they entering the retail channel?

Greg Mausz   03:46

So as a money manager or as a REIT looking to grow or a private equity firm looking to grow it’s best to have multiple sources of capital, both equity capital and debt capital. And so, you can go to banks for debt capital other institutional debt capital, but you can also come to the retail market to raise that capital and you can also come to the retail market to to raise equity whether it’s common equity or preferred equity. But the mass of fluent the Main Street dynamics are different than raising capital on Wall Street which may be different than raising capital from institutions. So as these companies try to raise capital to produce returns it’s helpful to have different avenues.

Damon Elder   04:33

Ok, so then what are retail investors looking for?  How do you target them?

Greg Mausz   04:38

So, retail investors again, most of these are in qualified accounts or the wealth they’ve accumulated throughout their life. So, most of them want to protect at first, so they they add alternative investments or non-traded investments into their portfolio to provide diversification. And non correlation a lot of these non-traded investments don’t fluctuate with the market so it can have a calming effect on the volatility as as we see in stock and bond markets.

Damon Elder   05:11

So, you know Greg you’ve been in this this market for multiple decades, um we’ve both been around for a long time we’ve seen sponsors come and go it’s not always the easiest place to succeed in as a sponsor. So, you know how do you learn to successfully enter this space and achieve real success?

Greg Mausz   05:29

That’s a good question, and the the more research and potential sponsor issuer can do the better. So, there’s associations we’re here at the ADISA meeting there’s other associations that are out there as well. But you need to find the right attorneys, transfer agents, managing broker dealers that know that retail space and that can advise issuers on how to best bring a product to market that fits their capital raising goals as well as investor demand, it needs to be a both and.

Damon Elder   06:05

Like everything homework is essential right? So, when you’re looking at the space what is the ideal sponsor profile and who should be coming into this market?

Greg Mausz   06:15

Sure so, number one they need to be very investor centric you you you need to be thinking about the fact that you are raising your managing money for the massive Fluence. It’s not some sophisticated institution so they need to have a very investor focused mentality. And nothing really exotic, again complicated strategies. So, you know real estate companies that are trying to raise capital, private equity, private debt there’s a lot of growth in private markets. And coming into this retail space can provide a great source of capital.

Damon Elder   06:54

So, Greg. just to wrap up…. You know we’ve talked about the proper type of sponsors and then what retail investors are looking for. but what are the best types of offerings that should be introduced into the retail channel if you’re really looking to have some success and to build your place in this channel.

Greg Mausz   07:11

Sure, so people want things that they can understand right, they understand real estate they can understand investing in companies. So, you want to kind of package that up in the form of an investment and it can be a fund or REIT or a BDC or some other structures like that. Right now, what’s really popular is more income-based investing you know. Again, retirees are looking to replace their income and so things that throw off dividends or distributions in a monthly or quarterly fashion can be great.

The other thing or a couple of other things is growth, you know people want growth as well.  You have to keep up with inflation and then you know the saying “it’s not how much money you make, it’s how much money you keep” So many of these investments can also have some tax advantages to them. And when you look at the the alternative investments some of them can have all three current income, growth opportunity, and tax advantages and that’s that’s a great way to structure an investment to really attract investor dollars.

Damon Elder   08:18

Gotcha, well you know the retail channel definitely can be very challenging you have to do your homework you have to be prepared but it can provide great long term capital raise success and if you’re targeting it properly and doing that homework. And one of the great ways to do it is like Greg said, is become familiar and active in ADISA. Get to know people like Greg and others in the channel who can help you along.

Well Greg thanks again for your insight, your wisdom is greatly appreciated and thank you for watching remember for all things alternative investment be sure to visit

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