Tech Spotlight: Opto Investments on opening private markets for RIAs

The private markets space has grown by trillions of dollars in managed assets as investor demand increases for private investment opportunities. 

BlackRock's 2024 Global Insurance Survey released Oct. 15 found that 91% of 410 respondents said they intend to increase their investments in private assets during the next two years. And EY estimated that the private markets have more than doubled in size over the past decade to $24.4 trillion in assets under management in 2023, from $9.7 trillion in AUM in 2012.

But while investor demand is there, not every independent advisor can meet those demands operating on systems built for traditional portfolio management. 

READ MORE: Clients want in on private markets. Should advisors hold their hands?

"It's hard to access private markets. It's hard to structure funds. It's hard to integrate that with existing systems," said Jacob Miller, chief solutions officer and co-founder of Opto Investments, which offers a private markets platform to independent investment advisors. "Having a single piece of technology that can turn that key and allow people to … offer a proprietary solution that's fully integrated to your existing RIA practice is something that doesn't exist in the market today."

Miller was among Opto's initial leaders who launched the tech firm back in 2020 partly as a way to integrate private markets access and analysis into the existing CRM systems for RIAs. 

Opto has since grown to include more than 250 RIA clients and most recently announced a deal on Oct. 10 with EP Wealth Advisors, a $26 billion RIA, to create a custom private markets program for their high net worth clients. The agreement was on the heels of Opto's largest deal to date with $64 billion RIA Mercer Advisors in June.

This mini profile is part of a series spotlighting vendors in order to help advisors and their firms make informed technology decisions. 

Name: Opto Investments

Website: www.optoinvest.com

Size of Opto: Opto works with more than 250 RIAs, 700 advisors; 35 RIA firms are launching custom fund programs with Opto. As far as its footprint in private market funds, Opto is involved in the launch of more than 50 funds, ranging in size from $25 million to $300 million, Miller said.

Products and services offered: Opto offers RIAs a customizable private markets platform that gives access to various investments in private credit, private equity, real estate and venture capital. Specifically, the platform helps firms model out how their exposures would look with certain private market investments and ways to adjust allocations over time. 

Who Opto aims to serve: Independent advisors and their fiduciary firms. 

What problems Opto is trying to solve: Miller said Opto aims to remove the "headache" or complexity of private market investments for RIAs by providing a structured and fully integrated platform to access these markets on a proprietary basis. 

How Opto is different from competitors: Miller said the difference with Opto goes back to the technology and its goal to create a more open architecture platform for RIAs to gain access to the private markets. 

"We aren't here to sell one fund who is paying us. And because we've built flexible technology, it's an idea sharing. Our clients can bring their ideas to the table. We bring ours. We use our systems and tools to net the best overall portfolio that builds a really powerful tool across the Opto network," he said. "And that's something you're not going to get with any other platform because their technology is rigid and what they sell is rigid."

What it costs: While costs can vary, the average cost structure is about a 30 basis-point annual management fee during the launch that sunsets to 25 basis points after the investment period, and then a 5% performance fee. 

Miller said Opto makes most of its profit through the performance fee — if and only if the funds perform above a certain benchmark. 

"Our incentive is not to sell the most of a fund, or sell the biggest funds or have a big fund raise," he said. "It's to focus on performance and alignment with what clients need."

What's next in development: Opto is continuing to streamline the platform so that it is scalable with the client growth for RIAs, Miller said.

It is also looking at private market investments in specific areas like defense and security and especially cybersecurity. 

"It's basically an AI arms race because AI makes it much easier for bad actors to do phishing, to do social engineering, to try and extract information. … So to combat that, you need equal defenses," he said. "There's some really interesting companies trying to figure out how to combat this next wave of cyberwarfare. And that's both the corporate, national and personal levels. We're working very closely with a number of VCs who are specialists in that area."