Coming Soon – Greetly Small Office Producitivty App

Coming to market soon is a new small office productivity app called Greetly. Greetly promises to help small offices save money while increasing productivity and security!

Greetly is an iPad app. When guests enter your small office, they walk up to the app kiosk. They simply enter their name and the host employee they are there to visit and the host is instantly notified via email and text.

Save thousands versus hiring a receptionist. Increase the productivity of the people closest to the front desk. And capture a digital log of every visitor.

Greetly – greet guests for less.

Wall St. Cheat Sheet: Here’s a Look at the Rise of Alternative Investments

Earlier today the Wall St. Cheat Sheet published an article by Dave Milliken, CEO of Grofolio. Wall St. Cheat Sheet is one of the largest  financial media companies in the U.S. with over 13,500,000 monthly unique visitors, and was named the #1 Social Media Influencer on Wall Street according to Forbes. The article is posted below. 

The centerpiece of the widely adopted Modern Portfolio Theory is that having a diversity of investments can lead to greater returns without increased risk. But during the financial upheaval of 2008 and 2009, many investors learned the hard way that their assets were too highly correlated. The result: once bitten, twice shy investors have record cash sitting on the sidelines. Grofolio has created an innovative way for accredited investors to put their capital to work again.

Meanwhile, many institutional investor modified their investment approach to follow the Yale Endowment Model. Espoused by David F. Swenson, Yale’s Chief Investment Office since 1985, the endowment theory: 

• Have a strong bias towards equities
• Suggests less liquidity is good; that investors pay a premium for liquidity and there are rewards for investors who can hold assets for a long period of time

The popularity of the Yale Endowment Model has led to an explosion in alternative assets — generally private equities, including direct investment in individual companies and funds. A McKinsey and Company report titled “The Mainstreaming of Alternative Investments” showed that alternative assets, or alts, increased from 7.7 percent to 14.3 percent of total global assets under management between 2005 and 2011. The same report said institutional investors planned to increase allocations to almost all alternative classes in 2013.

Diversification underlies adoption of alternative assets. By placing capital across investment categories, investors can earn higher returns without greater risk – a free lunch. The chart below shows correlation across asset classes. A correlation of 1.00 means assets move in perfect tandem; when one increases by 10 percent, so does the other. A 0.00 correlation indicates no relationship between returns. The graph of one year (ending August 28) returns shows the real world result — major US and international indices move in tandem, virtually the equivalent of no diversification.

The results of adding private equities into a portfolio? Harvard’s endowment achieved 12.5 percent annualized returns over the last 20 years, including the financial meltdown, according to The New York Times.

Retail investors trail institutions in the shift to alts, which account for 9 percent of the global retail market, versus 16 percent for institutions. High net worth investors individual adoption is lower due to the time and complexity of investing in them. By their very nature, there is less public, third-party information. Further, the variety of alternative investment classes makes it hard for an individual to evaluate and build a portfolio.

The amount of dollars at stake is astounding. The World Bank measures total U.S. market cap at $18.7 trillion. If retail investors, who Columbia Business Law Review says own 26 percent of equities, catch up to institutions in terms of allocations in alternatives, that would mean $327 billion shifted away from traditional assets.

Innovative alternative investment marketplaces like Grofolio seem poised to spur widespread adoption of alternatives by HNWI, who can afford longer investment horizons. Grofolio makes it easier and more efficient for HNWIs to identify, evaluate, and invest in the right alternatives for their portfolios. This, in turn, should release the excess capital ‘sitting on the sidelines’ while providing the capital necessary to grow America’s small businesses.

Dave Milliken is the CEO of alternative investment marketplace Grofolio.com. Dave has extensive marketing leadership experience with MillerCoors, Louis Vuitton Moet Hennessey, The Scotts Miracle-Gro Company, and Smashburger, #99 in the 2011 Inc. 500. Dave holds an MBA, finance emphasis, from NYU and a BBA from Emory University.

Title II Rulemaking Back on the Priority List?

According to Bloomberg, Mary Joe White, the U.S. Securities and Exchange Commission’s newly appointed chairwoman, has turned her attention to Title II of the JOBS Act.

By way of background, Title II of the JOBS Act  lifts the ban on “general solicitation” in private offerings under Rule 506 of Regulation D. Present law, which has been in effect more or less since legislative reaction to the Great Depression in 1933, prohibits a company that is raising money in a private raise (as opposed to, say, an IPO) to reach out to investors about its offering, unless the company has a previous, substantive relationship with those investors.  So, you can call your rich uncle or email your former boss — but if you were to post on Facebook that your company is raising money, you would likely blow your company’s exemption and jeopardize the validity of the entire fundraising round.

Title II of the JOBS Act, once finally enacted, is intended to change that. Although Congress left the details for the SEC to work out, the general notion behind Title II is that fundraising companies should be permitted to solicit whomever they want, by whatever means they prefer (Facebook, Twitter, radio ads, nailing pamphlets to front doors), so long as they don’t actually permit somebody to invest unless the company has verified that this person is an accredited investor.  (For a refresher on who is an accredited investor, see here.)

In other words, Congress directed the SEC to modify the rules so as to focus not on the relationship between the company and the investor, and not on the ways in which the company found the investor, but rather, on whether the investment opportunity is suitable for each investor. If the investment is suitable for the investor (generally, because the investor has enough wealth that she/he can afford to make risky investments), then who cares how the company located the investor?  This strikes us as a sensible acknowledgement of the way people and networks actually communicate in the age of social media.

Congress instructed the SEC to enact Title II by July of 2012.  The SEC missed this deadline, though they did release these proposed rules in August of 2012, and asked for public comments on the rules. But since then, not a lot has happened. From our understanding of the inside politicking, the conversation has been a heated one.  Proponents of the rule are anxious for it to be finalized ASAP to facilitate easier capital formation in this fledgling economic recovery, while opponents are concerned that the rules as proposed do not have enough built in investor protections.  The Bloomberg article cited above goes into greater detail on this conversation and some of the inside baseball involved.

The present debate seems to turn on whether to finalize these proposed rules as is (which would be the fastest way to enact Title II), and then make incremental changes to the rules over time as needed, vs. going back to the drawing board and creating a new set of rules, which would further delay implementation of Title II but would create the opportunity to build in some protections and features that some advocates believe to be beneficial.  We’d like to see the former approach taken — the rules aren’t perfect, but they aren’t bad, and we believe that they are a good enough starting point. We believe the benefit to our nation for its small businesses to gain greater access to growth capital (and its investors to gain greater access to true portfolio diversification) outweighs whatever marginal improvements could be made to the wording of the rules.

But, whether the SEC finalizes the August 2012 proposed rules or drafts new ones, either way we’re glad to see some forward progress on the Title II front. Between last November’s elections, the departure of former SEC chairwoman Mary Shapiro shortly thereafter, and the process of appointing and confirming her replacement, it was widely expected that SEC rulemaking activity would slow down during Q4 of 2012 and Q1 of 2013 — and so it did.  But now that Mary Jo White has been appointed to replace Mary Shapiro, things seem to be moving forward again. This is a good thing, no matter which way the Title II rules break.

We’ll keep you updated on any new developments.

Flashback: Grofolio presentation at [i4c] Campaign Finals

A year ago, Grofolio, then Funding Launchpad, presented to an audience of 1,000 as part of the [i4c] Campaign finals at Denver’s Ellie Caulkins Opera House. This presentation’s focus was the potential social impact of expanding access to capital to America’s startups and growth companies.

Overview of ‘Accredited Investor’

After the Securities Act of 1933 was established, companies wishing to sell securities must register with the Securities and Exchange Commission (SEC).  There are certain exemptions to registration, outlined in Regulation D of the Securities Act. Regulation D Rule 506, the most widely used exemption, allows securities to be sold without registering with the SEC, so long as the securities are being purchased by accredited investors.

The definition of an “accredited investor”, as given by Investopedia, is:

…investors who are financially sophisticated and have a reduced need for the protection provided by certain government filings…

Regulation D Rule 501 provides the parameters for accredited investors:

• An individual, or an individual and their spouse, possessing a net worth greater than $1 million at the time of purchase.  The value of their primary residence must be excluded from their total net worth.
• An individual who for the past two years has earned an income greater than $200,000. Or an individual and their spouse who jointly earned greater than $300,000. Individually or jointly, investors must expect the same level of income for the current year.
• Banks, business and small business development companies, insurance companies, or registered investment companies.
• Charitable organizations, corporations, or partnerships which possess assets exceeding $5 million.
• Employee benefit plans which meet the requirements of the Employee Retirement Income Securities Act.  A bank, insurance company, or registered investment advisor (see above) must be making the investment decisions if the plan possesses total assets less than $5 million.
• Directors, executive officers, or general partners of the company selling the securities.
• Trusts with assets in excess of $5 million which were not formed for the purpose of acquiring the offered securities.  A sophisticated person must also be in charge of making those purchases.
• Businesses where all equity owners are accredited investors.

Grolio is a digital marketplace that makes it easier and more efficient than ever for accredited investors to find alternative investments to diversify their portfolios.  Sign up now to be notified when we launch.

Alternative Assets: Complex, Risky, and Rewarding

Alternative investments tend to be more complex and less burdened by regulations than traditional assets – public stocks and bonds. As one might expect, investing in greater complexity and risk can lead to higher returns. Within a broader investment portfolio, alternative investments provide diversification; alternative assets generally have low correlation to traditional assets – public stocks and bonds. Hence, alternative investments are becoming more mainstream.

50% of the US GDP, and 65% of new jobs, are created by private companies. Given the large contribution to the economy, private firms represent a massive investment opportunity. Therefore, private equities, despite being labeled as alternative, represent a significant portion of the economic landscape.

Fees, risks and complexities notwithstanding, alternative investments are a great option for pursuing above market returns in an environment where interest rates  hover near zero percent and over a trillion dollars remain “sitting on the sidelines”.

Sign up for Grolio’s beta to learn more about alternative investment opportunities through the Grolio marketplace.

Private Equities: How Lower Liquidity Leads to Lower Risk

Despite an abundance of evidence about the benefits of adding alternative investments to their portfolio, most investors continue to hold just traditional assets. Given the economic turmoil of the past few years, it’s no wonder investors remain risk averse. Many investors do not realize that what they consider “safer” actually adds more risk – and lower returns – versus a truly diversified portfolio.

Adding investments in illiquid private equities – companies that are not publicly traded – are a great option for achieving long-term wealth appreciation. While it may seem counterintuitive, if you have a long-term time horizon, illiquidity creates the benefit of lower volatility. Traders cannot move in and out of private equity investments in seconds, which has become a trademark of today’s stock market investor, whether an individual or financial institution. Valuations, in turn, are closer tied to company performance and fundamentals and suffer fewer shifts and shocks.

David F. Swenson, in Pioneering Portfolio Management, recognizes that liquidity should be avoided, not pursued, because in a properly diversified portfolio it results in lower overall returns. Swenson further suggests liquidity disappears when you need it most, and becomes available for private companies as they grow.*

Looking for a faster, more efficient way to find alternative investments for your portfolio? Grolio is your alternative assets marketplace. Join Grolio now and search investments in minutes.

Sources: https://en.wikipedia.org/wiki/David_F._Swensen and http://seekingalpha.com/

Overview of the Endowment Model

The endowment model, often referred to as the “Yale model,” refers to an investing strategy developed by David F. Swensen and Dean Takahashi. Swensen has been the Chief Investment Officer at Yale University for almost 30 years.

Consider three key theories behind this widely accepted strategy.

1.     Diversification. The endowment model teaches that by choosing a variety of uncorrelated asset classes you’ll yield higher returns. Investors are encouraged to divide their portfolio into five or six asset classes. The model also highlights a bias towards equity.

2.     Risk increases with similar or opposite funds. Swensen’s theory is that funds should be different, but not opposite, to decrease risk. Similar funds are too volatile because losses would be felt too greatly if that market takes a hit. Conversely, selecting funds that are opposite will not yield as much return because when one investment is doing well, the opposite one is most likely doing poorly. Gains and losses would ultimately cancel each other out.

3.     Less liquidity is good. This idea was quite revolutionary when Swensen revealed his model. The endowment model teaches that investors pay a premium for liquidity, thus lowering return. Swensen also suggests liquidity disappears when it is needed most. Thus, this strategy focuses more on alternative investments, such as private equities, hedge funds and venture capital.

The endowment model’s name comes from the long, successful track record on behalf of university and other endowments and family offices. These organizations are generally focused on long-term appreciation over immediate cash needs. The Yale and Harvard endowments have reported returns of between 15 and 16 percent over the last 25 years.

Interested in achieving true portfolio diversification and long-term wealth appreciation?  Join today to be notified when Grolio launches.

Can You Hold Alternative Investments In Your IRA?

The Individual Retirement Account (IRA) has become one of the most popular tax-advantaged investment vehicles used by Americans today. It was recently estimated that four out of 10 U.S. households owned assets in IRAs[1], accounting for over a quarter over all U.S. retirement wealth[1]. Moreover, eight out of 10 households have retirement savings that may eventually rollover into an IRA[1]. Because IRA ownership is generally associated with higher net worth investors[1], properly diversifying IRA assets has become an integral part of any shrewd investors’ overall retirement savings strategy.

However, IRA assets must be held with a qualified custodian, and because most custodians lack expertise in alternative investments, IRA savings are commonly limited to traditional investment options like stocks, bonds, or mutual funds. For this reason, most investors are surprised to learn that the Internal Revenue Code has always allowed IRA owners to invest their tax-advantaged assets in a broad range of alternative investments. That’s right— diversifying your retirement plan to include hedge fund assets, private equity or other investments in private companies is within reach. As U.S. investors continue to seek out alternative investments to complement their retirement savings, more custodians are expanding the scope of investments they allow their customers to hold in their retirement accounts.[2]

Why consider alternative investments in your IRA? One must only look back a few years to the recent financial crisis for a startling answer. Retirement assets suffered some of the steepest losses during the financial crisis, in part because of the non-diversified traditional investments held therein. Allocating retirement savings to alternative investments — like hedge funds, private company investments or venture capital — is no longer simply fodder for cocktail-hour bluster, but rather a sensible way to broaden asset diversification, a proven strategy to reduce volatility in a portfolio’s performance, and even increase the potential for higher returns over time.

The mission of Grolio is to provide greater access to alternative investments. Grolio makes it easier and more efficient for all accredited investors to find, search, sort, and filter alternative investments to identify the best fits for their portfolio — whether the investable assets are qualified under an IRA or not. Grolio also offers the chance to interact with other potential investors.

Interested in adding alternative assets into your investment portfolio? Sign up for Grofolio now to be notified when we launch later this summer.

(Grofolio recommends talking to a qualified tax consultant before investing retirement assets in alternative investments).

[1] http://www.ici.org/pdf/per18-08.pdf

[2] E.g. Equity Institutional (http://equityinstitutional.com), or Millennium Trust Company (http://www.mtrustcompany.com)

Is Modern Portfolio Theory Valid in Today’s Economy?

The ideal portfolio for any investor would be low risk with a high return. Unfortunately, investing isn’t that simple.

The best known solution to the risk/reward equation is modern portfolio theory (MPT). This theory suggests that a variety of investments, when combined, bring greater returns without increasing risk.  MTP was introduced in 1952, by Harry Markowitz, and made the assumption that investors did not want to take risks. While innate investor risk aversion remains, some question whether the MPT remains a valid theory in today’s market.

The basis for the MPT is portfolio diversification.  MPT has been questioned recently due to seemingly repetitive financial crises.  There are those who believe that due to the unknown factors in today’s uncertain economy, a new theory needs to be developed to handle the current investment environment.

However, there are many factors that make the MPT as valid today as it was in 1952, according to Paul Pfleiderer, in his article Is Modern Portfolio Theory Dead? Come On.  The basic fact of investing is that investors are rewarded for taking higher risks. However, not all risk is rewarded, such as risks that can be diversified away by holding bundles of investments. When an investor holds large quantities of high risk stock, they face diminished return given their risk. However, a portfolio that is diversified is based on several holdings with risk. The fluctuation of one stock does not have the same affect. MPT focuses on building a diversified portfolio, which works well in an uncertain environment, such as today’s economy.

Accredited investors and institutions are increasingly further diversifying into alternative assets, including private companies, hedge funds, venture capital, and real assets. Alternative assets generally demonstrate very low correlations with traditional assets. These assets are also generally less liquid. Investors who include alternative assets in their portfolio seek long-term wealth appreciation without the regular fluctuations of the public stock market.

Interested in adding alternative assets into your investment portfolio? Sign up for Grolio now to be notified when we launch later this summer.