Pershing Deepens Relationship With CAIS, iCapital as Alts Platform Doubles in Size

The custodian is positioning itself to grow as Charles Schwab and TD Ameritrade merge.

Pershing headquarters in Jersey City, New Jersey. (Gino Domenico/Bloomberg)

Pershing headquarters in Jersey City, New Jersey.

(Gino Domenico/Bloomberg)

Pershing, BNY Mellon’s custody and clearing firm with $2 trillion in assets, is trying to make alternative investments easier for wealth managers as they allocate more money to those asset classes.

For years, the more than 700 RIAs that custody with Pershing have had access to CAIS and iCapital Network, two of the largest third-party alternative investment platforms used by some of the biggest wealth managers. But it was an onerous process that required similar paperwork to be done twice — once with the third-party platform and again for Pershing.

Clients asked Pershing to resolve that and, after more than a year of work, it delivered what they asked for last week, the company said.

Now, RIAs only have to fill out required documents for products on the alternative investment platforms one time. Then, the documents will be automatically uploaded to Pershing’s platform, eliminating a need for advisors to manually upload them and reducing the potential for errors.

“One of the major barriers to investing in alternatives is the manual steps involved in the process. As advisors increasingly turn to alternative investments for diversification and uncorrelated returns, we are committed to streamlining the process by making it more digital and more seamless for them so they can drive greater efficiencies,” Rob Cirrotti, managing director of Global Strategy & Product Management at Pershing, said in a statement.

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Balances on Pershing’s alts platform, called the Alternative Investment Network, have doubled over the past three years, according to the company. The custodian’s 10-year-old platform — with 2,500 third-party alternative investments like non-traded REITs, hedge funds, private equity, private debt, and managed futures — includes investments offered by CAIS and iCapital Network.

Pershing has a long history of making alternative investments available to advisors, according to Cirrotti. And its “PRIME” unit offers fund managers securities lending, capital introductions, and other financing solutions. BNY Mellon is a fund administrator and custodian to credit, hedge, private equity, and real estate funds.

Benjamin Harrison, the head of Pershing’s RIA custody business, told RIA Intel in March that the unit was “absolutely laser focused on growth.” At the time, in addition to its variable pricing that it has offered since the firm began custodying RIA assets, Pershing announced two new fee models: a subscription-based model to simplify costs and make them more predictable for RIAs, and a zero-transaction-fee pricing model for RIAs interested in a lower-cost “solution for portfolios that favor equities and ETFs.”

“I think one thing that’s really important to note is that nothing of value is ever free. We’ve never tried to be a discount provider, we think we’re a value provider,” Harrison said at the time.

This year, Pershing also lowered the minimum assets under management for RIAs to $100 million; a higher requirement than other custodians have but still a change that opens a market of hundreds of more wealth managers.

Together, Pershing, Charles Schwab, and TD Ameritrade form an “oligopoly” that custody for more than 50% of RIA assets and that trio is on the verge of turning into a pair. Regulators approved Schwab’s acquisition of TD Ameritrade and that the deal is expected to close before 2021, creating a custodian with over $5 trillion in assets and being a custodian to nearly 15,000 RIAs.

This story has been updated to correctly describe Pershing’s relationship with CAIS and iCapital Network. Investments on those third-party platforms were available before the effort to eliminate manual processes.

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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