Snider and Marapachi - September 2023

PRO BUYER PROFILE | SEPTEMBER 2023

Bank of America’s alternative vision

The wirehouse is bullish about the benefits of alternative investments. But winning a spot on its platform remains as tough as ever.

PHOTOGRAPHY:STEPHANIE DIANI

There are few greater prizes in fund distribution than a spot on the Bank of America wealth platform. Giving access to 19,000 financial advisors across both Bank of America Private Bank and the Merrill wealth management business – who oversee a combined $4.1tn in assets – it can make or break a fund. A spot on Bank of America’s coveted recommended list of strategies further bolsters the chances of flows and a spot in its home-office model programs guarantees money. But, like anything with this much upside, the prize is not easily won. First, managers must get in front of the firm’s due diligence team. Then there’s the small matter of a fund winning its approval. But even then, flows don’t arrive by magic. To get the most out of this hard-won spot, managers must work with Bank of America to understand what resources are needed and which approaches work best when speaking to all those advisors. To do all this, there are two people inside Bank of America that every asset manager needs to know: Anna Snider, who leads its 65-strong due diligence team, and Ninon Marapachi, who is head of asset manager relationships. Snider’s team is responsible for vetting the approximately 3,000 investment products that make it onto the Bank of America platform. Her team’s recommended list then consists of less than 10% of the wider platform, across various vehicles, of which a subset is used in the firm’s discretionary model portfolios. These are run by head CIO portfolio management Joe Curtin and allocate some $340bn to third-party managers. In 2017, when Citywire last profiled Snider, she was in the midst of whittling the wider platform down to the size it is today. And the fact the platform has been scaled down means every strategy can be covered by either Snider’s team or Morningstar. Although a smaller platform means the bar is higher than ever for new additions. But there is one area where Snider’s team is onboarding lots of new strategies: alternatives.

Alex Steger

asteger@citywireusa.com

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‘If you assume that the process for you to get onto platform is going to be easy because the investor is an individual and not an institution, that is a fatal mistake.’ Anna Snider

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Snider told Citywire earlier this year that she has been adding between 30 to 50 alternative funds to the platform per year and intends to continue at this rate ‘over the next several years.’ The stat includes both hedge funds and drawdown funds – which focus on everything from venture capital to distressed real estate – that the firm has historically made available to qualified purchasers. ‘It's actually a great market to put dry powder to work, because of the reset in valuations,’ Snider says. She adds that the other part of the firm’s alts expansion is focused on ‘products where we can meet new clients so that they can get exposure to private markets, through interval funds, and BDCs [business development corporations], and perpetually offered vehicles.’ Snider notes that the majority of these vehicles – at least the ones that have proved popular – focus on private credit and real estate. ‘[That’s] because this is what's available in that perpetually offered space. But also because of the interest rate environment. Until very recently, with the interest rate environment being like it was, it was also a very compelling time to be in those asset classes. So, those two things converged to create a very robust fundraising environment.’ Indeed, assets in alternative investments at Bank of America have doubled from this time five years ago, with advisor adoption of such products up by around 45% in that period, according to a spokesperson for the company. Still, this doesn’t mean any old alternative fund can land on the Bank of America platform. ‘Obviously, we're still being extremely selective,’ Snider stresses. ‘There's a lot of supply out of there. And we’re onboarding less than what is available out there.’ According to XA Investments, there were 193 interval or tender offer funds with a combined $138bn in assets under management as of June 30 – an increase of 26 funds and $29bn from the same time last year. The high supply may lead some to question whether the increased presence of alternatives in retail portfolios is a result of asset managers pushing products rather than wealthy investors crying out to allocate to less liquid assets. But Snider and Marapachi disagree. ‘The way we think of it, including alternative investments is a complement to [a] traditional portfolio [and] introduces a lot of benefits that clients need to be aware of and we are on this educational kind of mission now with our clients, because we truly believe that [alternatives] are needed in client portfolios,’ Marapachi says. These benefits include diversification, yield enhancement and mitigating volatility, she says. Snider adds: ‘If you look at the largest allocators in the world, they have been using alternative investments since they existed. And they’ve used them because they improve the ability to get to a portfolio’s investment objective. ‘Now, they have to be done selectively and correctly. In order to do that, you’ve got to have the right expertise. But my point is that [the rise of alternatives] is driven first and foremost by how alternatives can help improve investment outcomes, which then drives client and/or advisor demand, which then creates supply.’ She notes that supply has always been there for institutions and ultra-high-net-worth investors, but the rise of structures like interval funds and BDCs has now made private markets available to a wider retail audience.

2016 – present Bank of America, Head of due diligence for the Chief Investment Office

2007 – 2009 Bank of America, Director, senior research analyst, alternative investments

2003 – 2011 Bank of America Merrill Lynch, Senior vice president, third-party private equity and real asset fund of funds

2011 – 2016 Bank of America Merrill Lynch, Head of global equity due diligence

Anna Snider

The high volume of supply can also present a challenge to alternative managers. Their shiny private credit fund may have won approval from Snider and her team, but flows won’t arrive by themselves. Firms need to commit resources to get in front of those 19,000 advisors, and this is where so-called traditional asset managers – those who have historically focused on public markets via mutual funds but have lately expanded their alts capabilities – have an edge over more tenured private asset shops, who are more used to dealing with institutional investors. ‘You have all these traditional asset managers who have a lot of resources, probably like 75 distribution people plus, and that means a lot when it comes to our channel, because the key to getting to a client is to get to advisors, and we’ve got 19,000,’ says Marapachi. ‘So a manager who comes with three people, by definition that's going to be a lot more difficult to execute. And a lot of alternative investment managers, outside of very few, they just don't have a lot of distribution resources.’ Snider agrees. However, she adds traditional managers should not expect to sell alternatives the same way they do mutual funds or ETFs. ‘The challenge for more traditional shops is that this is not like a mutual fund or an ETF or SMA sale, where advisors intrinsically understand how those structures and vehicles work, they understand the underlying investment strategies and how those markets work. This is a new space. It's not the same time period and it's a much more highly resource-intensive business to run.’ She adds a further word of warning for institutional managers too. ‘If you assume that the process for you to get onto platform is going to be easy because the underlying investor is an individual and not an institution, that is a fatal mistake. I have had many managers say that the processes we put them through is as – if not more – rigorous than any institutional clients they've ever had.’

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‘The most annoying thing for me is when I see an asset manager being so in love with their processes that they miss an opportunity to be simple and to focus on the client.’ Ninon Marapachi

Ninon Marapachi

2020 – present Bank of America, Head of asset manager relationships within Investor Solutions Group

2002 – 2008 Merrill Lynch, Structured products origination

2008 – 2020 Bank of America Merrill Lynch, Head of hedge fund origination

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Anticipating an easy ride is not the only way to get on the wrong side of Snider and Marapachi. ‘The most annoying thing for me is when I see an asset manager being so in love with their processes that they miss an opportunity to be simple and to focus on what the client would care about,’ Marapachi says. ‘This, by the way, sometimes happens with old men. They’re so interested in the thing that they built, and they talk about it, and you find yourself 45 minutes into the meeting and it's an excruciating level of detail. It's just like, “wow!”’ Snider, meanwhile, will give short shrift to managers who make too much of their collective experience. ‘My number one pet peeve is in marketing presentations, when [managers] tell me that they've got like 427 years of cumulative experience on their team. That doesn't mean anything to me!' she says. ‘I don't understand why people use it. It's not relevant. I guess it sounds good but it's the strangest stat I've ever seen and it's used so often. That's literally the most annoying thing that an asset manager has done. But I've learned to sort of let it go.’

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They are also less than impressed by the lack of diversity among the asset managers they meet with – a fact underscored by Citywire’s latest Alpha Female Report. The study, released this month, shows the number of female portfolio managers has increased by a mere 0.1 percentage point in the past year, going from 12% to 12.1%. In the US, the figure went backwards – from 12% in 2022 to 11% in this year’s report. It is a fact not lost on Marapachi, who was born in Tanzania and moved to the US after winning a scholarship to study at Mount Holyoke College. ‘Asset managers really need to focus on the topic and need to make sure that they have a diversified employee base, across both investment and non-investment areas,’ she says. Bank of America hosts regular advisor symposiums, sometimes focused on diverse communities of advisors, for example, Black or Hispanic. Marapachi says that for such events, the firm invites asset managers to speak and hopes that their representative is a member of said community. ‘I would love for them to send a human being that looks like the community we are putting together,’ she says. ‘Often managers are not there today. But that needs to be a mission down the road because you can find time and you can move on it. Every asset manager needs to have a goal of sending a representative that reflects the audience.’ Snider has been trying to use Bank of America’s influence to move the needle. In 2020, her team began asking asset managers questions about their diversity and inclusion initiatives. The team uses this data to track asset managers’ progress over time and measures the success, or lack thereof, of firms’ diversity efforts. While diversity responses are not weighted more heavily than investment criteria, Snider’s team does incorporate this information into its due diligence. ‘The premise we came at this with was all of the great studies that have been done on how diversity within teams creates better decision-making,’ she says. ‘[And] what are we doing all day long in a due diligence function but looking at the efficacy of decision-making processes in investment management teams? And if there's something that tends to lead to better decision-making, why wouldn’t we be looking at that?’ So, three years into the project, are asset managers making any progress? ‘We do now have three years of good stats around where the industry is, and [we are] beginning to be able to see movement, which is not at all material [but] it's a lot better than it was when we started asking for it.’ She notes that large, publicly listed asset managers tend to have the resources and shareholder pressure to have better structures in place to promote diversity, whereas smaller shops do not. She adds that the level of disclosure still needs improving. ‘Data is still hard to get. Asset managers – they'll answer some things,’ she says. ‘But not others.’

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Bank of America Investment Solutions Group

Due Diligence team

Bank of America Chief Investment Office

Due Diligence team

Bank of America Investment Solutions Group

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