When we kicked off the 50 Growers Across America project in 2020, our goal was simple: Find out which planning-centric RIAs are making the most headway in their own markets. For our 2020 and 2021 reports, we looked at growth over the prior few years, zooming out in order to get a clearer picture. This year we decided to switch things up and look only at growth during 2021. We expected that the change in methodology would produce a whole new crop of RIAs – perhaps those who stuck closer to the sidelines in the preceding years but turned on the burners last year.
What surprised me is just how much overlap there has been. Many of the Growers named for each state were also listed in 2020 or 2021, or indeed both. That suggests that for many of the RIAs chronicled in the following pages, growth is not an accident, but a mindset. There’s something about adding AUM and employees that’s baked into the DNA of many of America’s most successful RIAs.
Let me tell you a bit about our methodology. We use only publicly reported numbers, which are helpfully compiled for us by Discovery Data. Only firms that report having a significant number of financial planning clients were considered, since we wanted to make sure we were only considering financial planning-oriented RIAs and not money managers. We’ve also limited our universe to RIAs that are not affiliated on a firm level with a broker-dealer or other institution (though their employees may be dually registered). Finally, we’ve endeavored to remove RIAs whose assets under management aren’t truly ‘theirs.’ This is admittedly a bit qualitative, but we did our best to strike companies that are primarily back-end service providers rather than client-facing planners.
Once we’d done all that, we looked at growth in 2021 across three categories: percentage growth in AUM, monetary growth in AUM, and percentage growth in employees. Combining these into a single numerical measure of growth, we generated the list you see here.
Does that mean that these 131 RIAs are the fastest-growing independent planners in America? Absolutely not! Our list is a bit unusual in that it’s broken down by state, which helps us highlight some under-the-radar stars, but also means that RIAs in the richest and most populous states must contend with far stiffer competition. As an illustration of how ‘unfair’ our method is, consider that our starting dataset contained fewer than 30 firms each from Alaska, North Dakota and West Virginia, while New York and Texas boasted about 1,500, and California presented us with 3,246. But of course, the whole goal of the project is to find out who’s performing best in each given market – and also to find some truly interesting and successful firms that haven’t yet attained national recognition.
Another way our list differs from some others is that the above process of picking winners and runners-up entailed no interaction with the firms. That is to say, the RIAs in this report did not ask to be here. They could not compensate us in any way to be considered or to be named. For that matter, they could not avoid being named; some of the firms listed in the following pages appear to have been flying under the radar on purpose.
This brings me to another point. The mention of an RIA is not at all an endorsement of its services or its business. All of them report that they do financial planning. But do they do financial planning well? Are they all run by people who are willing to put clients’ interests ahead of their own? We don’t know, but with 131 firms mentioned, the answer to both questions rates to be ‘no.’ Caveat client!
With all that out of the way, I hope you enjoy this report, which has been put together exclusively by the Citywire RIA editorial team – made up of senior reporter Ian Wenik, reporters Andrew Foerch and Sam Bojarski, summer intern Dan Tully, and me, with guidance from Alex Steger. Through a mix of interviews, emailed questions, and our own research, we’ve tried to figure out what makes these Growers tick. We’ve also sprinkled in some fun facts about the firms’ founders and home cities.
I always look forward to working on each year’s edition of 50 Growers Across America, since it’s a chance to learn about new and well-known RIAs, and to find out a bit more about this growing industry and this great country. My thanks to Discovery Data for the assistance, and thank you for reading.
Here’s to growth!
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STILL GROWING
ALEX ROSENBERG, CFA, CFP
arosenberg@citywireusa.com
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3 Takeaways on Real Estate Markets Today
Private Credit Opportunities Today
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METHODOLOGY
3 Takeaways on Real Estate Markets Today
Markets have been volatile in 2022 amid concerns about rising rates, inflationary pressures and geopolitical developments, leaving many investors wondering about the implications for real estate. As one of the world’s largest investors in real estate with over $250 billion in assets under management across public and private real estate markets and strategies, here are three key takeaways from our unique insight into U.S. real estate markets today.
1. REAL ESTATE IS WELL POSITIONED FOR INFLATION
We believe an allocation to real estate can help insulate a portfolio from the negative effects of inflation. Rents can often be increased along with inflationary expectations, and sometimes even in excess of inflation. In addition, the value of real estate assets tends to increase as replacement costs rise. As a result, we find that real estate has performed relatively well historically during periods of above-average inflation.
Real Estate has generated strong returns amid high inflation
Average Quarterly Returns When U.S. Consumer Inflation Was Higher Than Average
As of December 31, 2021. Source: Bloomberg, National Council of Real Estate Investment Fiduciaries. Higher-than-average inflation is measured as when the year-over-year U.S. Consumer Price Index exceeded 4%. During those periods, we examined the average quarterly returns of private U.S. real estate (as measured by the NCREIF Property Index (NPI)); U.S. equities (as measured by the S&P 500 Index); and U.S. fixed income (as measured by the Bloomberg US Aggregate Bond Index). The 44-year time period represents the number of years since the inception of the NPI. See disclosures for full index definitions. Past performance does not guarantee future results. It is not possible to invest directly into an index.
2. RISING RATES AREN'T ALWAYS NEGATIVE FOR REAL ESTATE
Increases in rates are often viewed as negative for real estate. But if rates are moving higher as a result of a strong economic backdrop, we feel real estate can benefit. Historically, private real estate returns have been positive during Federal Reserve tightening cycles.
Real Estate returns have been positive during past tightening cycles
Private U.S. Real Estate Returns During Periods of Monetary Tightening
As of December 31, 2021. Source: Bloomberg. Periods of monetary tightening are measured by increases in the federal funds rate. Private U.S. real estate is represented by the NCREIF Property Index (NPI). Past performance does not guarantee future results. It is not possible to invest directly into an index.
3. OPPORTUNITIES ARE EMERGING IN REAL ESTATE DEBT, PARTICULARLY IN FLOATING-RATE SECURITIES
We see meaningful opportunities emerging within the real estate debt market. We believe the recent repricing of real estate credit, as shown by higher commercial mortgage-backed securities (CMBS) spreads, has created attractive relative valuations. Within real estate credit, we think floating-rate securities represent good risk-adjusted opportunities and are well positioned to help insulate a portfolio against a rising-rate environment.
Recent repricing of real estate debt has created attractive relative valuations
CMBS Spreads to U.S. Treasurys, Sept. 2021 - March 2022
As of March 31, 2022. Source: Bloomberg. The line represents the option-adjusted spread to Treasury of the Bloomberg US CMBS 2.0 Baa Index Total Return Index. Data shown encompass the six months ending March 31, 2022.
©2022 Oaktree Capital Management, L.P.; ©2022 Brookfield Oaktree Wealth Solutions LLC; and ©2022 Brookfield Public Securities Group LLC. Brookfield Oaktree Wealth Solutions LLC and Brookfield Public Securities Group LLC (“PSG”) are subsidiaries of Brookfield Asset Management Inc. (“Brookfield”). Brookfield Oaktree Wealth Solutions LLC is registered as a broker-dealer with the U.S. Securities and Exchange Commission (“SEC”) and is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). This commentary and the information contained herein are for educational and informational purposes only and do not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities or related financial instruments. This commentary discusses broad market, industry or sector trends, or other general economic or market conditions, and it is being provided on a confidential basis. It is not intended to provide an overview of the terms applicable to any products sponsored by Brookfield Asset Management Inc. and its affiliates (together, “Brookfield”). Except where otherwise noted, this commentary contains information and views as of April 2022, and such information and views are subject to change without notice. Some of the information provided herein has been prepared based on Brookfield’s internal research, and certain information is based on various assumptions made by Brookfield, any of which may prove to be incorrect. Brookfield may not have verified (and disclaims any obligation to verify) the accuracy or completeness of any information included herein, including information that has been provided by third parties, and you cannot rely on Brookfield as having verified any of the information. The information provided herein reflects Brookfield’s perspectives and beliefs as of the date of this commentary. INDEX PROVIDER DISCLOSURES: The quoted indexes within this publication are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. INDEX DEFINITIONS: The Bloomberg US Aggregate Bond Index is a broad-based, market-capitalization-weighted bond market index representing intermediate-term investment-grade bonds traded in the United States. The Bloomberg US CMBS 2.0 Baa Index is a rules-based index measuring the market of Baa-rated investment-grade commercial mortgage-backed securities (CMBS) 2.0 securities. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas from the U.S. Bureau of Labor Statistics. The NCREIF Property Index (NPI) is the primary index used by institutional investors in the United States to analyze the performance of commercial real estate and use as a benchmark for actively managed real estate portfolios. The S&P 500 Index is an equity index of 500 widely held, large-capitalization U.S. companies.
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Private Credit Opportunities Today
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Private Credit Opportunities Today
With persisting inflationary pressures and the prospect of rising interest rates on the horizon, many investors expect market turbulence and economic uncertainty in the year ahead. Private credit investments may continue to serve as a stable and resilient source of income for investors seeking shelter from the storm.
GREAT EXPECTATIONS
Growth of private credit has significantly accelerated since the Global Financial Crisis, when increased regulatory oversight and balance sheet scrutiny led more banks to focus on lending to only the largest borrowers. This left a tremendous opportunity for private lenders to step in and fill the void for many other companies in need of financing solutions.
Private loan issuance hit a record high in 2021¹, and there are no signs of growth slowing down anytime soon. There are several reasons why private credit is expected to continue on its growth trajectory. For one, the pace of private equity raises hasn’t slowed, and firms continue to raise more and more capital and have significant cash reserves, or “dry powder,” to deploy.
This high level of private equity dry powder suggests there is meaningful room for additional growth in the space, and ample opportunity for private lenders.
Origination activity, or the process borrowers and lenders undergo when executing a new loan, also points to continued private credit growth. In 2021 deal originations reached their highest levels in five years. This suggests that borrowers— especially private equity sponsors—are increasingly willing to pay the small pricing premium for the expertise provided by many private credit lenders, particularly in complex acquisitions.
As origination activity has grown, so too have deal sizes. Deals are rebounding back to pre-pandemic levels, over $110 million in average size,² underscoring the continued need for companies to pursue private lending avenues.
RISING RATES, INFLATION ON THE HORIZON
The prolonged low interest rate environment has resulted in historic low yields for traditional fixed income assets. As such, discerning investors have been turning to the private markets in search of yield—and discovering private credit’s potential to deliver higher yields. As an example, private credit continued to outperform other fixed income assets throughout the 2021 low-rate environment, both in terms of yield and total return.
Looking ahead, inflationary pressures and a recovering U.S. economy have the Federal Reserve signaling as many as nine potential rate hikes in 2022. However, we expect the process of raising interest rates will be a slow and conservative one. As a result, traditional fixed income yields will likely stay well below historical averages for some time—and investors will likely continue their hunt for yield beyond traditional fixed income
SHELTER FROM THE STORM
While private credit can provide a reliable source of yield in a low interest rate environment, it can also serve as a valuable hedge against the impact of rate increases. The investable universe of private credit mainly consists of floating-rate loans—and the variable interest rates associated with these assets means they can offer protection against the impact of rising rates and inflation.
Floating-Rate Loans Have Performed Well in Prior Rising-Rate Cycles (Total Return %)
Private credit investments also have a shorter duration— or less sensitivity to interest rate changes—than fixed rate debt. As such, they’re less likely to decline in value as interest rates rise. This downside protection is evident when examining how private credit has fared in past rising rate environments. As shown, private credit has performed well in previous cycles. Further, private credit loans are also collateralized, high in the capital structure, and normally include covenants designed to protect investors from unforeseen risks— such as the borrower taking on additional debt. As such, they offer better downside protection built into the loan agreements, as well as the potential for lower losses in a default when compared to other types of debt instruments.³
THE RIGHT TIME FOR PRIVATE CREDIT
The private credit market has grown at a rapid clip over the past two decades, and several signs point to continued growth ahead. And while private credit has historically provided high yields relative to traditional fixed income, we believe it can offer additional benefits in the face of today’s inflationary pressures and anticipated rising rate environment. The floating-rate loan composition of private credit—and the frequently built-in protection for investors—can make them a valuable hedge against the impact of rising rates.
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Private Credit Opportunities Today
Past performance does not guarantee future results. This is for illustrative and informational purposes only. Indices are not actively managed, and investors cannot invest directly in indices. Periods greater than one year are annualized. All investments involve risk of loss, including loss of principal invested. U.S. 10- Year Treasury represented by FTSE 10-Year Treasury (OTR), Corporate Investment-Grade Bonds represented by Bloomberg Barclays U.S. Corporate Bond Index, Senior Loans represented by Credit Suisse Leveraged Loan Index, Private Credit represented by Cliffwater Direct Lending Index. Any information presented prior to the launch date (September 30, 2015) of the Cliffwater Direct Lending Index (“CDLI”) is back-tested. The CDLI performance has been prepared for informational purposes only. Source: Bloomberg, ICE of BofA, FTSE 10-Year Treasury, Credit Suisse, Cliffwater.
1 As of December 31, 2021; Source: Refinitiv LPC
2 As of December 31, 2021; Source: Refinitiv LPC
3 Source: Cliffwater, S&P LCD, S&P Dow Jones, J.P. Morgan, Lincoln International
©2022 Oaktree Capital Management, L.P.; ©2022 Brookfield Oaktree Wealth Solutions LLC; and ©2022 Brookfield Public Securities Group LLC. Brookfield Oaktree Wealth Solutions LLC and Brookfield Public Securities Group LLC (“PSG”) are subsidiaries of Brookfield Asset Management Inc. (“Brookfield”). Brookfield Oaktree Wealth Solutions LLC is registered as a broker-dealer with the U.S. Securities and Exchange Commission (“SEC”) and is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). This commentary and the information contained herein are for educational and informational purposes only and do not constitute, and should not be construed as, an offer to sell, or a solicitation of an offer to buy, any securities or related financial instruments. This commentary discusses broad market, industry or sector trends, or other general economic or market conditions, and it is being provided on a confidential basis. It is not intended to provide an overview of the terms applicable to any products sponsored by Brookfield Asset Management Inc. and its affiliates (together, “Brookfield”). Except where otherwise noted, this commentary contains information and views as of April 2022, and such information and views are subject to change without notice. Some of the information provided herein has been prepared based on Brookfield’s internal research, and certain information is based on various assumptions made by Brookfield, any of which may prove to be incorrect. Brookfield may not have verified (and disclaims any obligation to verify) the accuracy or completeness of any information included herein, including information that has been provided by third parties, and you cannot rely on Brookfield as having verified any of the information. The information provided herein reflects Brookfield’s perspectives and beliefs as of the date of this commentary. INDEX PROVIDER DISCLOSURES : The quoted indexes within this publication are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. INDEX DEFINITIONS: Bloomberg Barclays U.S. Aggregate Index is a broad-base, market capitalization weighted bond market index representing intermediate-term investment-grade bonds traded in the United States. Bloomberg Barclays U.S. Corporate Bond Index measures the investment-grade, fixed-rate, taxable corporate bond market. It includes USD-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers. Bloomberg Barclays U.S. Corporate High-Yield Index measures the USD denominated, high-yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on the indices’ EM country definition, are excluded. Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds. Cliffwater Direct Lending Index measure the unlevered, gross of fee performance of U.S. middle market corporate loans, as represented by the asset-weighted performance of the underlying assets of Business Development Companies (BDCs), including both exchange-traded and unlisted BDCs, subject to certain eligibility requirements. Credit Suisse Leveraged Loans Index tracks the performance of senior floating rate bank loans and is designed to mirror the investable universe of the USD denominated leveraged loan market. This index tracks the investable market of the U.S. dollar-denominated leveraged loan market. It consists of issues rated “5B” or lower, meaning that the highest rated issues included in this index are Moody’s/S&P ratings of Baa1/BB+ or Ba1/BBB+. All loans are funded term loans with a tenor of at least one year and are made by issuers domiciled in developed countries. FTSE U.S. Treasury Benchmark (on-the-run) Indices measure total returns for the current two-, three-, five-, seven-, ten-, twenty- and thirty-year on-the run Treasuries that settle by the end of the calendar month. As a result of the reduced auction schedule for one-year Treasury bills, as of May 2000, an existing coupon bond with approximately one year to maturity is selected as the one-year benchmark. In most cases, this is an old two-year security. ICE BofA U.S. High-Yield Index is market capitalization weighted and is designed to measure the performance of U.S. dollar-denominated below-investment-grade (commonly referred to as “junk”) corporate debt publicly issued in the U.S. domestic market.
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3 Takeaways on Real Estate Markets Today
