Unlocking the Power of Alternative Investments for Retirees with Ben Fraser

00:01
Narrator
Welcome to another edition of the what's next? Retirement. Podcast with Craig Wear. Life is full of transitions that have a financial impact now and in your future. When finances are affected, there are always questions to ask and choices to make. As an independent, certified financial planner for well over 30 years, craig has helped Americans make decisions that give their best financial futures. The experiences with so many clients has given him a unique perspective to help with. What's next for you as you navigate the unknowns of your own life, what's Next answers to the retirement issues on your mind.

00:44
Craig Wear
Hey, welcome back. This is Craig Wear, as the intro said. Hey, look, if you are trying to figure out what's next in retirement, this is the show that it's designed to just kind of focus on you. What are the big questions in life that relate to money and finances and what do you want to be when you grow up? All those kinds of things. We just try to hit on all those things. Typically we talk about tax planning and general financial planning and stuff like that, but today we got special guests for you and a special subject, something that we haven't covered before, but I think you're going to really dig it. What if you're tired of the ups and the downs of the stock market? What if you're tired of having the euphoric increase and then all of a sudden the rug gets pulled out from underneath you and your statement that was a 401K is the proverbial two.

01:32
Craig Wear
Okay? On the other hand, I can't tell you how many conversations we've had with people that were like, well, my balances were half a million or 2 million higher. But what happened at all that? There is a way that you don't have to suffer that. If you're tired of the ups and downs and you don't want to go to the extremes of hiding it under the mattress or sticking it all into annuity someplace, we have some hope today. We are coming through our white shining night. Today is Ben fraser? Ben is managing director of Aspen Funds. He's also their chief investment officer and he's gladly decided to come on and share some great ideas with us. So Ben, welcome to the show.

02:17
Ben Fraser
Well, Craig, thanks for having me on. It's fun to connect again. We had you on our podcast not too long ago and it was a really fun time. So it's fun to come on yours. You definitely set me up well, so didn't plan on being a nice shine armor, but I appreciate that, man.

02:35
Craig Wear
I tell you what, man, for guys that are just tired of watching Apple and Tesla and all the others just kind of yoyo, I hope they really take this to heart. I have done this in my own life in different ways and I hope that people will kind of just pay attention and maybe we can cast away some of the paradigms about the space we're going to be talking about and talk about it just in real world terms. Before we get into that, tell us just about Ben, who are you and what's going on in your life? What do you do when you're not putting on the official I'm smart business hat?

03:10
Ben Fraser
Yeah. Well, again, thanks for having me on. Yeah, my life outside of work is mostly made up of keeping four little girls happy. I got four girls, nine and under, and even have a girl dog. So I'm very outnumbered. But I love it. It's kind of fun. You got to just embrace it, right? So we have a blast. Very busy life, but it's all good. So hobbies. I don't have many of them because of that, but I get into pickleball recently. I grew up playing tennis okay. Just won a tournament the other week. Kind of fun with the buddy.

03:53
Craig Wear
You just won a tournament, you're kind of getting into picklebark.

03:58
Ben Fraser
It wasn't a very competitive tournament, we'll say that, but it was a fun time.

04:05
Craig Wear
Well, it sounds like there were two people that were real competitive and everybody else was wondering what happened here.

04:10
Ben Fraser
Right, exactly. We had tone it down . We started getting a little too aggressive there.

04:17
Craig Wear
Are you guys like the college tennis players that go into the novice pickleball court and just clean house? Is that what's going on? Exactly.

04:26
Ben Fraser
Yeah. We look for the tournaments that we just dominate and feel really good about ourselves afterwards. It's kind of funny because we started getting we're playing in the final, and this is our first time playing pickleball, me and my partner, and I'm going to throw him under the bus here. He's actually sitting right over there so he can hear me, but he started getting real into it and just slammed the ball right into this old lady, and she shrieked and he got a little too into it. We ended up winning the game, so that's all that matters. Right. And it was good. No, it was all that you won.

05:02
Craig Wear
That's all that matters. Right. I'm going to go pick on a bunch of senior citizens today. It'll be fun.

05:07
Ben Fraser
Pretty bad. We're like, oh, we should probably tone it down .

05:13
Craig Wear
Well, as and I think many of the people that listen to the podcast know my wife and I have kind of a different gig going on in it. We live full time in a bus. We travel a lot summers. We spend up in the mountains in Colorado and kind of do our thing. A really big thing in a lot of the RV resorts that we stay at throughout the year is this pickleball thing. I will have to tell you that I'm fairly athletic but I've never played pickleball. I always kind of turn my nose up at it. It's like I'm not old enough to play pickleball yet, right? But I think I am. I think I'm right there in that demographic.

05:52
Ben Fraser
It's fun. I grown up playing tennis. It's fun because it normalizes. A lot of the skill level, right, to be able to play and just to have a fun time. It's not that hard. The higher level players, they're good, but you can keep a game going and have a fun time doing without much experience in this. It's been fun and it's pretty funny. It's crazy to see how much of a wave it's just taking over with the pickleball. I saw article crazy. I was a Wall Street Journal or something where they're converting this is a local here in Kansas City. They're converting all these empty Sears buildings that have just been defunct now into indoor pickleball.

06:31
Craig Wear
I'm like, no idea. They'll mint money too.

06:34
Ben Fraser
They'll mint money and it's just this big empty warehouse that no one's using it, but it's in a great location and so it makes sense. It's just funny to see how much is college.

06:45
Craig Wear
That's cool. That's good stuff. Well, I'll have to discover my inner pickleball one of these days. I was always a baseball basketball guy, but I did some racquetball and stuff like that. Hey, pickleball is all the rage, so I guess we'll have to get with it.

07:02
Ben Fraser
There we go.

07:04
Craig Wear
Let's kind of dive in, if you don't mind, man. I set up the alternative investment space. Before we kind of dig into some of those details, I'm kind of curious. How is the company I mean, how is Aspen Funds even launched? Tell me about why or how it came to be.

07:25
Ben Fraser
Yeah, so it started ten years ago. I joined about five years ago. And so the company was formed. Actually, one of the founders is my father, which has been pretty fun. His partner, they really saw an opportunity kind of post the great financial crisis of investing in distressed mortgages. Right? Obviously there's a lot of those back in the day. One of the unique things is that you can pick these up for very deep discounts relative to what's owed. You can work with borrowers, help them stay in their homes, work out new modifications of their terms, help them get back on track and actually do good and make some good money along the way. So they started that ten years ago. The initial thought was, hey, this is a good time to get in. It's a good opportunity. Timing is a big deal as we can get into down the road of investing.

08:19
Ben Fraser
Initial thought was, hey, let's just do one fund friends and family, make of money and move on. Really started growing kind of with this space and over the past ten years have become one of the bigger players in this niche and now have, I think, 3500 mortgages in all 50 states that we service and help our borrowers. And that business continues to go on. We have legacy funds that continue to operate, just great track record there and still doing good with our borrowers. One of our fun things we love to do with that is tout the number of foreclosures we have, which is less than 2% of all these workouts end in foreclosure. We got an amazing team and pretty cool model to still help people out while making money. So been doing that. That really launched us several years ago into kind of broadening our approach in the alternative investment space because really the original vision for Aspen was we want to be kind of the premier provider of alternative investments for the retail or accredited investors.

09:32
Ben Fraser
We can talk more about why alternatives make sense and why you're probably hearing more about them now than you ever have. It's actually because of some recent regulatory changes about ten years ago that kind of completely changed the game to allow access for the average individual to kind of get to participate in these types of things. It really kind of expanded our approach. We've now since invested in over $300 million of real estate across multifamily industrial storage, retail, oil and gas. And so we've really expanded. Our goal is the same, is to help accredited investors, individuals, invest like the ultra wealthy and diversify out of just stocks and bonds. Because what we ultimately discovered, we have a podcast, like I mentioned earlier, called Invest Like a Billionaire. Part of our thesis from the research that we did early on was the ultra wealthy, the billionaires of the world, the family offices, the pensions endowments, all these Yale endowment you probably have heard about, right?

10:40
Ben Fraser
If they're ultra success investing, they've been investing very heavily in alternative investments and private alternative investments for decades, many decades. They've been investing very differently than the average high net worth individual, which is mostly stocks, bonds, mutual funds, right? Not to say those are bad at all, but there's some real wisdom in creating diversification outside of just the public markets, into the private markets and into multiple asset classes within the private markets. Because many of these investors, the groups I just mentioned, the billionaires family offices, et cetera, they are generally allocating, even now, to this day, upwards of 50% plus of their total portfolios into these types of deals real estate, venture capital, private equity, hedge funds. It makes up a very big part of the portfolio where the average investor, individual maybe 5% in alternatives. Alternatives, quote unquote. Because most people think they're invested in real estate when they're invested in REITs.

11:44
Ben Fraser
I'll make a very strong argument that REITs are not real estate. It has some ownership, real estate ownership in there. But yeah, it's very different. That's kind of our thesis, and we're seeing a huge trend to that.

11:59
Craig Wear
Our listeners are typically the guys and gals that are about to retire are already into retirement. They kind of built a nest egg for many of them, at least the ones that we get to talk to and help is they built that nest egg by just plodding money away, sticking it in that 401K for the last 30 years. They wake up one day and they got a million, 2 million, 3 million, 4 million plus sitting in an IRA. They did it all through the stock market. Very seldom do we find people that really embrace this alternative investment space. I'm the guy with just enough lack of hair and gray hair that I remember why most people didn't do that. It was really the wild west back in the remember they were just tax deals, the cattle deals, the livestock deals, the oil and gas deals that had absolutely no economic value other than the tax benefits.

12:59
Craig Wear
Of course, the hit and a lot of those things washed out and I think people just got really afraid of it. That's really not what's available now, right? I mean, the types of things that you offer and that other people in your space offer, it seems to me like the space has really grown up. I'm sure there are still some bad players, but for the most part, there really are some good things that can happen when you open your mind to doing things a little different than what's comfortable or what's convenient. So I've got my own answers. From your view, I mean, if you were 65, 70 years old, and you had a couple of million bucks sitting out in an IRA and some other money outside of other places, knowing what what are, just one or two of the main reasons why you would be looking at putting some of the asset classes that you just mentioned into your portfolio.

14:03
Craig Wear
Why would you do that? Why would somebody want to do that?

14:08
Ben Fraser
Yeah, great question, great observations. I think what's really changed is not necessarily that these deals are all of a sudden now being done better quality deals, better access, better transparency. They were being done more in a vacuum, right? They were mostly being done with big institutional investors. In 2012, there was something called the Jobs Act, which kind of flew under the radar, but it basically changed the game. I think this is a revolutionary change from before this act. You had to have what's called a preexisting and a substantive relationship with an operator, a provider of these investment vehicles, to even have the opportunity to see them. Right? Most of these were traded through broker dealers. Whenever you kind of go into the traditional financial plumbing system, right? The legacy system, broker dealers, et cetera. It's very high fees. There's just a lot of crap that's being sold because it's all commission based.

15:09
Ben Fraser
It kind of attracts, to your point, some of the Wild West, some of the cowboy operators. In 2012, the regulations changed to where these sponsors could directly market to the individuals and be able to share openly about the things that they're doing without the worry of these kind of previous regulations. There's still some rules you have to kind of be aware of, but that's if you go on Facebook or wherever you have a decent net worth, you've probably seen some ads for different multifamily deals or whatever, right? You're seeing a lot more of it and because of these changes allowed access. Obviously that doesn't necessarily mean all the bad actors are gone. Right. You still got to understand how these deals work. You got to learn how to do some due diligence and all that. But the access has changed since then. The amount of capital and retail capital that has come into the market has been really extraordinary.

16:07
Ben Fraser
The projections from this point on are pretty one direction just going up and to the right. Right. Because it's got a lot of attractive benefits relative to just stocks and bonds and advisors. There's several surveys that I could reference. We have a whole podcast, I think our first podcast episode references a lot of these studies where most advisors are wanting to increase allocations to alternatives for their clients because one, you generally get better returns and two, you get true diversification. What has kind of come to happen over the past probably decade, I would say, in the public markets is correlations are approaching zero right. Across all or approaching one sorry, of all asset classes.

16:52
Craig Wear
Meaning explain. Yeah, explain what that means.

16:54
Ben Fraser
Yeah. The traditional idea, modern portfolio theory is if you have a good blend of stocks and bonds, generally those trade in an inverse way. If stocks are up, bonds are down. If bonds are up, stocks are down. You kind of create some balance, you create some mitigation, so you reduce kind of your variance of return. If you have more stocks relative to bonds, you're going to get more upside and growth. You can kind of keep that average growing. Right? Well, last year 2022 was the worst performance of the 60 40 portfolio in the past 100 years because not only did the stock market suffer from some of the interest rate increases, but if you understand basic math, interest rates going up impacts values negatively in bonds. Bonds had a terrible year because interest rates were going up right. Driving down the value of bonds. What was supposed to be this kind of risk mitigation from a diversification standpoint, both went the negative direction.

17:55
Ben Fraser
That's what's happened even with REITs, right. Oh, I'm going to get some diversification by going into REITs. Sure, they all have different drivers of what's driving the demand, but in the public market, so much of what drives performance and drives price discovery is sentiment. Right. What is the sentiment of the market? What's the FEG going to do next? Right. It's very reactionary. Everything is kind of in this vacuum and going off of trading off the headlines. The more that happens, the more these different asset classes trade more similarly and reducing diversification. It's a little aside in diversification, but in the private markets, these are not traded on any exchanges. If the Fed does something different tomorrow than they did yesterday, it's not going to change the pricing of the asset you're going into. Right. If you're buying a multifamily apartment building in a good market with some positive population growth, positive rent growth, and you have direct ownership into that asset, you can drive a lot of value even outside of the external factors going on.

19:02
Ben Fraser
Right. There's things you can control and have a lot more impact on that and reduction of your variance of return, which is kind of the traditional measure of risk.

19:14
Craig Wear
Yeah, you don't have the yoyo on your statement every month where you're not riding the roller coaster, so to speak. Certainly the values change, and there certainly are risks in anything that you invest in. To avoid that volatility to me is huge. To get into an investment strategy that allows you to participate in totally different components than what is the expected future value of this company's cash flow streams in the future is pretty huge. Let's define I've been away from the definitions for long enough because I haven't done the actual investment management work for now, six or seven years. So what are the thresholds now? We're talking to people that have to be accredited investors. Right. Just real quickly, before I get into some meat, I want to cover, what is an accredited investor in today's definitions?

20:15
Ben Fraser
Yeah, great question. If you haven't heard that term, accredited investor, a lot of people think, oh, I have to go get some certification or some kind of test I have to pass to become accredited. And it's not that. It's basically you are or you're not based on your financial position. So there's two ways to qualify. One is by income. If you're a single income earner and you make over $200,000 for the past two years, or if you're a joint income earner and making over $300,000 for the past two years and expect to make the same going forward, then you're accredited. Or if you have a net worth of greater than $1 million, excluding your personal residence, then you are accredited. The kind of folks you're talking about have the IRAs of two three $4 million, they're pretty comfortably going to be accredited.

21:00
Craig Wear
Yeah. So, as just a quick commercial, if you will, I'm a huge proponent of alternative strategies, but I'm even a bigger proponent of owning these alternative strategies in a Roth IRA instead of in a regular IRA. Because of the potential and the demonstrated historical performance can be significantly higher than what I would say the average person's experience is with a typical investment advisor and investment management program. I can put it in the show notes, but if you'll go out to our website@craigweer.com, you can download the books that we've got. The first book I wrote about the whole subject of why would you even want to do Roth conversions is there and you can download it for free. The second one I wrote, which is The Five Biggest Mistakes, which is really Roth Conversion Secrets, that kind of gets into the mechanics of it. All that stuff is available there.

22:03
Craig Wear
All this stuff that we're talking about, it's great from a return standpoint, but, man, you put a multiplier on your benefits when you get it to where those benefits are forever going to be tax free. That's kind of what we talked about on your podcast. All right? A lot of the people are kind of they probably got the same white goatee that I've got, and the flowing hair is gone. They remember the days of the shysters and the slick stories and the high fees and all those kinds of things. As Ben's explained, there certainly are bad players. As he said, you need to do some due diligence. But that was the Wild West. Now everybody's kind of wearing jeans and flip flops, and it's a much more relaxed environment. You still need to know what are the questions you need to ask, right? You're going to get this memorandum and this prospectus, and they're written by attorneys so that we all stay totally confused and they still charge $1,000 an hour type of thing.

23:14
Craig Wear
But what are the primary things? If you had a big brother who knew nothing about this space and he said, what questions should I ask? What would you tell the listeners? Are the really the main two or three primary questions that are the most important thing before you get into the minutiae of the details of the due diligence?

23:43
Ben Fraser
Yeah, no, absolutely. And I want to be clear, too. There is a lot of concern from investors because the private markets are largely unregulated, right? There's exemptions from regulation, which is create this private market. Part of the reason that you have to be a credit. You have to have some financial wherewithal to be able to invest generally in these deals. The idea is, hey, there potentially can be some risk here, and you got to at least have some sophistication to be able to understand what you're investing in. That it's not someone that has $100,000 to their name and they put it all in one deal or bitcoin or whatever goes bad, right? So I want to be clear there. The reason I want to emphasize that is my biggest thing, what I always tell people is the best thing you can do is get the education yourself, right?

24:38
Ben Fraser
Learn about these types of deals. I think it's even broader than just private alternatives. What I'm really seeing a trend of which is really positive, I believe, is people are taking more ownership of their money, right? Traditionally, the system has been, hey, I'm going to go make as much money as I can. I'm going to stuff as much as I can into the 401K, get the match set and forget it, never think about it. What people don't realize, and we talked about this on your podcast when you come on our podcast. People work so hard to make their money, but then they spend no time maximizing what they've earned, right? They're not making their money work for them, and they just stick it into these mutual funds, but they don't really know what it's in, right? They don't really know what are the fees and those kind of things.

25:20
Ben Fraser
And so it's not even just alternatives. I think it's just a general approach of being more active. I'm seeing a lot more I'll call it DIY investors, where I'd say I want to take a little more ownership of my finances. Because when you do that, regardless of what you invest in, you're going to have way better performance, right? You're going to be able to identify the strategy, you're going to be able to identify the things that are the red flags, right, and things that you want to be aware of. I say all that to say, if you're just kind of getting started here, the best thing you can do is start really slow and really small, right? The best way to reduce risk is just reduce how much you're investing initially and just start building a track record with some sponsors. Even before you kind of get to that point, there's a lot of things you can do.

26:07
Ben Fraser
I like to think of a few things, right? If you're investing money, imagine you're going to a horse race and you've kind of got these three components of a deal. There's the racetrack, there's the horse, and there's the jockey, right? I like to think about these separately. Your racetrack is what's, the asset class they're investing in? Is this a multifamily apartment deal? Is this a self storage investment? Is this land entitlements? Or is this oil and gas indication, right? What is the track that this horse and jockey are on? Do I believe in the long term sustainability positive of the story, right? I'm going to have a very different feeling about investing in urban office than I am going to be in suburban multifamily residential housing or something, right? Those are two very different things, you understand. What are the long term trends supporting or not supporting these assets?

27:06
Ben Fraser
The second is the horse. The horse is the actual investment itself. What's the strategy? What's the vehicle they're going to do it with? Is this a development deal? They're going to build this from the ground up and lease it up and sell it? This going to be going to buy an old Class B apartment in a good area? They're going to renovate it and lease it up at higher rates, kind of value add deal? Is this in a good market? Is this in a growing market? Is this in a diminishing market? Right? That's kind of the other piece of this. You got to look at the big asset class. You got to look at the market and the deal itself. Arguably the most important piece of this whole equation is the jockey, right? The jockey is who's the one driving the deal? Who's the one that is making this deal happen?

27:55
Ben Fraser
Putting all the pieces together. What's their track record? How many deals have they done? What's been historical performance? What are the backgrounds of the sponsors? Do they have any gray hairs? Right. Or are they just kind of young bucks kind of getting started in trying out a new strategy? There's a lot of things you can just basic smell test, right. Thinking about in that way, breaking it down, the different components. If something jumps out, dig into that more. Right. If something doesn't make sense, you don't feel comfortable with it, move on. Right. There's a lot of deals out there's, a lot of things to look at. That's the most simple way I've kind of been able to describe it just to start and try to break it down like that. Specific due diligence I can get into. Those are the good places to start.

28:43
Craig Wear
Yeah, that's good. Yeah. I don't think you want Uncle Vinny who decided, man, there's some money in this apartment complex down here. Let's go hit up all the relatives and let's go in and do it. I don't know anything about it, but man, Uncle Vinny's smart. He can figure it out. That maybe is not where I want to put my money. Right?

29:01
Ben Fraser
Right.

29:02
Craig Wear
The other thing too, that was important to me back in the day is and even now when I look at different things, I like to look at how is the sponsor compensated? What is their motivation?

29:13
Ben Fraser
Right? Yes.

29:14
Craig Wear
Their motivation just to make sure you stay on the hook? That where they can get management fees forever or are they rewarded for great performance? As long as I get my part as an investor, I don't really care what. The sponsor gets. What I care about is me. To focus too much on the fee aspect without looking at the track record of what have they been able to do in the past, I don't think that makes a lot of sense. I know a lot of people get stuck on fees of any kind and I do too, in certain instances. What you really have to focus on anything is it going to give me what I need and what I want at a reasonable value to me. I'm kind of jumping into a couple of different areas here, but kind of the primary point is if I were looking at an Aspen funds deal, I want to figure out are they really truly a partner in this with me or are they just somebody that's going to hit my account and get their fees every single year?

30:22
Craig Wear
Right. From what I've gathered from the stuff that I've looked at, you guys really have a really unique approach, or a very equitable approach to that, in my opinion. That wants me to launch into kind of so we can keep some track of our time and what we're doing here. Give me the pitch of why Aspen Funds, what makes Aspen Funds unique from the 20 other people that as soon as I click on an ad, I get to see their stuff too?

30:53
Ben Fraser
Yeah, absolutely. I mean, you kind of hit a lot of it. It's, I think, alignment of interest. Right. Part of our kind of pitch, if you will, is we as owners invest in every single deal that we bring to our investors and we sometimes invest a nice chunk of the overall equity we're raising on the same terms, on the same fee structure, everything as our investors. Because how better do we align interest than we're putting our own money in there? Because we believe in the deal. Right? Our whole goal is we're not going to bring anything to our investors that we would not excitedly put our own money in. I think that's like the ultimate litmus test. Right. I think that in of itself is a pretty big differentiator I think we got a tenure track record. We've been investing for a long time, very diverse backgrounds of our principals.

31:49
Ben Fraser
We have four principals been investing combined over 100 years and investing lots of different asset classes and we've seen the ups and the downs and we're trying to do right. We have a lot of investors that work with us and most of our investors invest more with us over time. It's usually a pretty good indicator that they like what they're seeing. I think it's a lot of things and I'd kind of make another comment too, going back to the fees. The more you kind of get into the space and understand what's the market rate for this fee, what's normal versus what's outside of kind of normal range. You can get a pretty good sense of a sponsor from like there's these things called PPMS Private Placement Memorandums. Very simple or very similar to a prospectus for a stock, right? I usually go first thing I do, I go straight to the fee section and the waterfall section, because these two things show you exactly who gets paid and what priority and what are the splits between investors and the sponsors.

32:56
Ben Fraser
What are the fees that they're taking and when do they take them and how are they taking them? Because those things, they're going to be the most indicative of anything else aside from you got to believe in the deal, believe in the strategy, believe in all that. But it'll tell you a lot. It'll tell you a lot. To your point, it's important to know that I think one other point I'd make too. I think as you're kind of getting into this and obviously we're not financial advisors, I'm not giving any advice, so I got to throw that caveat out there. What I've seen a lot of people do is I kind of call it the sock drawer of investments, right? They hear about Uncle Benny's deal and they throw some money into that one. They see another deal on a Facebook ad and they're like, I'll throw some into that one.

33:42
Ben Fraser
They're just getting referrals left and right. I'm just going to throw these deals. Eventually they have this kind of hodgepodge of investments that they didn't really they kind of looked at but ultimately they're now getting these tax forms and they don't even know what they're doing. How are they doing, what's the strategy behind it? It's just this kind of random assortment of deals. What's so important, as with anything, is you got to understand what are your goals? First, as an investor, are you looking for passive income, like a current income stream? Right. Are you looking to multiply the net worth? Within your portfolio, what kind of portfolio allocations do you want to have to these different buckets, right? You got to think through that first and you got to go and invest with a strategy in the investments you do. Because a lot of times someone can do this kind of stock drawer investing approach and they'll look back and I just did like ten multifamily deals and they're all in Texas and they're all Class B value ads.

34:43
Ben Fraser
I thought I was getting diversification. You're probably not that diversified as well as you think, right? Because you don't have some other asset classes, some other sponsors, some other markets. You can really be pretty selective as you kind of build this over time. Again, you want to have a good strategy. For example, we have a debt fund that pays a current income stream. We pay 9% every month that's annualized and been doing that for ten years, and it's just bread and butter vanilla income, right, but some people need income, especially if they're retired and they want to live off the net worth. Other people, they don't need income and they want to kind of maximize gross. We have development projects. You can kind of come into a development project and get some pretty big IRRs if everything goes well. Right. You got to understand what you're doing, what kind of risk you're taking, what are your ultimate goals, and use that as you're kind of going through this whole learning process.

35:40
Craig Wear
I think one of the things that needs to be said before we shut down here is we need to point out that one of the things that people really like about the stock market investing is that if they want to pull their money and they want to go buy something. They make a phone call or they get online, they crank it out and it shows up by wire in their deal. That's because they're dealing with a marketable security that has a well defined active market that's, in my opinion, controlled by a lot of different rules and a lot of different players. Man, when we go out and we buy several Class B apartment complexes and we throw them into a bucket and a sponsor offers them to us, it's difficult to go get $50,000 out of a $25 million deal instantly, right. There's a liquidity issue that exists inside of some of these that also needs to be part of your decision of how much you put in and you need to look at when you need money, how often you need money, that kind of thing.

36:48
Craig Wear
The deals that you put together are talk just generally about, let's say I had $100,000 of my million that I wanted to do a baby step if it wasn't in the debt fund type of thing. Am I locking money up for 15 years like if I were in annuity? Or am I looking at a lot shorter time frame than that?

37:13
Ben Fraser
Then, yeah, every deal is different. Again, you got to understand what's your goals is. It liquidity, then that's going to change the types of deals you invest in. Our debt fund, for example, we have a one year lockup period and then full liquidity thereafter. It's not instantaneous, but it's within 90 days generally, is what we target. You've always been able to hit that, so you have some liquidity. Right. That type of an investment, it's an evergreen fund, so it's kind of always going and put money in, take money out as you need. Other deals, like we have oil and gas investments that we've done, and those are ten year deals, and you're not getting any money out of it right, other than the cash flow coming from it, because these are hard assets and we're reinvesting back into our drilling, et cetera. So every strategy is different.

38:00
Ben Fraser
Again, that's probably the biggest knock that alternatives get, right? Well, they're not liquid, and there's definitely some merit to that, right? Liquidity is important. Liquidity, you have to manage liquidity as an investor. What's interesting that we actually did this episode on our podcast, one of the first ones where we looked into some studies that was done by a Bain company. It's a big consulting firm on investment strategy and liquidity, right. What they found was most investors, even through downturns, overestimate their need for liquidity, right. Meaning that they think they need more liquidity than they actually need. If that's a preventative thing from keeping you investing these things, then you got to think about that, right? Because here's a really concrete example. You talk about investing in Class B apartments. Well, you can go, well, I'm just going to go invest in some REITs because I can have liquidity, but I'm still investing in apartments.

39:01
Ben Fraser
Well, check this out. There's a metric called price to book ratio. You've probably heard of price to earnings. It's basically the price you're paying for a dollar of earnings annually. Well, price to book is a similar ratio, but it's great for real estate. What's the price you're paying relative to the book value of the assets? Right. If you invest into a syndication or a fund that's a direct private investment, your price to book is generally going to be pretty close to one, maybe less than one because you have some little bit of upfront fees. Say it's pretty close to one, that's really good, right. Most of your dollar is investing in the asset. Well, the average price to book of REITs and this has changed over time, but pretty consistently it's about five X. That means if you put $5 into a REIT, only $1 of that is actually going into the asset.

39:55
Ben Fraser
The rest is goodwill and premium. You could call that liquidity premium, right. That's the premium you're paying to get liquidity to that asset class. I would argue that liquidity is probably not that it's not worth that much. Right. It's not worth only getting 20% value into assets. So it's something I think about. Liquidity is important. I'm not saying put all your eggs into the private market. If you do that, you got to know what you're doing and manage liquidity and manage lines of credit and other things. You don't want that to be a deterrent from investing in private alternatives because one, you're paying a lot more for liquidity than you probably should be. Two, you probably don't need as much liquidity as you think you do.

40:44
Craig Wear
Yeah, well, a lot of the people that we deal with, I've kind of coined the term IRA millionaire. Other than the obvious, most of the people that we work for are folks that, generally speaking, are probably never going touch very much of their IRA over their lifetime. They're so used to being able to go get it that they maybe would say, oh, I'm not going to lock money up for three or four or five or ten years, because if I need it, I want it. To your point, in reality, you're probably going to die with more money than you have today. There's some percentage of that portfolio that the world would really have to change for you to need that portion of that portfolio, whether it's 10%, 20%, 50%, 60%, whatever. Of course that's our Bailey Wick is putting together that comprehensive financial plan so that you can make better investment choices on what you're doing.

41:47
Craig Wear
We don't invest people's money, Ben. We don't manage it. We don't send them to investment advisors. We don't do any of that. We help with the construct of the structure of what that should look like and help them to understand the parameters that are necessary and that they need to make things work. And we love that part of it. The tax planning portion of what we do is our intent to help them really make sure that they're able to maximize that last half of life where they're not just feeling the pressure of Uncle Sam every April and all these huge required minimum distributions that come out. I really dig what you guys are doing. Tell me, how can people connect with you? Give me two or three ways that people can connect or if it's simpler than two or three, just how do they find out more about Aspen funds and try to be able to connect to ask some really specific questions for them?

42:51
Ben Fraser
Yeah, so probably the simplest way is if you just want to get more general education or podcast, invest like a billionaire. It's thebillionairepodcast.com we had you on the show so you can listen to that episode. It's a great episode, but our whole point of that show is just education around alternative investing. Right. It's just breaking down and demystifying a lot of the things that go on there and then, yeah. If you really want to learn more about the investment strategies themselves, aspenfunds US is the best place to go find out about it. You can download a myriad of our ebooks and other free content we put out there and schedule a call with our team, if that makes sense. Yeah, cool.

43:35
Craig Wear
They don't have to go to an investment advisor to work with you. They don't have to go through Fidelity or Schwab to connect with you. They can have a conversation. You can help them with a lot of the mechanics of how do we actually get that in my IRA or my Roth or whatever. Your team can do that for them, right?

43:57
Ben Fraser
Exactly. Yes, absolutely.

43:58
Craig Wear
There anything else that I didn't ask as a good host that I should have asked to get the point across that this is really a pretty cool space people need to check out?

44:12
Ben Fraser
No, I think we hit it all. I think we hit that and more. I feel like we hit it the big stuff. I think the big thing I would just say is, like I said earlier, really take an ownership mindset over your money. You work so hard to accumulate this money. Don't just turn a blind eye or just blindly trust someone else to have your best interest at heart. Right? Because no one's going to care about it. Your own nest egg more than you. Not even just the investing side, but everything about it, right? You got to take ownership of it, dive in, figure things out, start to learn and you'd be shocked at this stuff is not that complicated. The whole system is set up to make you feel like you can't figure it out. You don't know what you're doing, you need help.

44:55
Ben Fraser
It's really not that complicated, right? It's some common sense, of curiosity, asking good questions and just experience. Just starting to read these things, get on these email lists, start talking with these different firms and just start doing it. Right. You just rip the bandit off and start diving in because there's some really good gold on the other end of the side here.

45:20
Craig Wear
Cool. Well, I've listened to several of your podcast episodes up till leading up to me being on there just so I get a feel of the vibe and what you guys really do. I highly recommend that you guys get out there and listen to one or two of them subscribe to their podcast. If you haven't, click the button, subscribe to this one so that you can be right on the cutting edge of the stuff that we bring to you as well. So Ben, thanks a lot, bud. I appreciate you being here and man, looking forward to maybe another time we can hang out and share some good information with folks.

45:53
Ben Fraser
Sounds good. Thanks so much, Craig.

45:55
Craig Wear
You bet.

45:58
Narrator
Investment advisory services offered through Q Three advisors. This presentation is for educational and informational purposes only and is not intended to be individualized financial, tax, or investment advice.