Bo Parfet On the Importance of Exploring the Alternative Investment Frontier

It has become common practice for many investors to restrict their investment strategies to a primary focus on publicly traded equities available on the stock market. Although this roster of public companies has generated sizable wealth for shareholders in the past, there are other professionals who advocate looking beyond the stock market as a sole investment vehicle. Bo Parfet, investment professional, philanthropist, and mountaineer, represents one such alternatives-focused investor.

Bo’s approach to his professional investment career is much like his personal life— hard work and perseverance to meet rigorous challenges. Bo completed his personal goal in 2007 when reaching the summit of Mount Everest and thus becoming only one of 127 people in the United States to summit the tallest mountain on all seven continents — The Seven Summits. These endeavors enabled him to explore the world and learn first-hand how social impact affects environmental change.

In 2013, Bo founded Denali Venture Philanthropy, where he serves as CEO, with his wife Meredith, who serves as President of the organization. With Denali Venture Philanthropy, Bo is on a mission to address significant global issues such as equal education for all, decreasing poverty, and protecting the environment. As such, Denali Venture Philanthropy funds entrepreneurs who are sincerely committed to social change.

These experiences have afforded Bo Parfet the opportunity to think outside the box when it comes to traditional investment strategies. In the same way that populations migrate to seek out opportunity, capital must migrate away from public markets to unlock innovation for the common good.

The Constraints of Traditional Investing

The traditional stock market can provide many benefits for companies and shareholders alike. The idea for the average citizen to buy into a certain product, brand, or company to contribute to the global economy while having the potential to profit simultaneously is intriguing for many. And those companies that decide to go public with their offerings generally do so to raise money in hopes for exponential business growth.

While the traditional market has historically generated a great deal of wealth for investors, many well-regarded organizations, including Vanguard, are predicting a decrease in public market returns over the coming years. The prediction can be traced back to a number of different factors, such as a decline in the total number of publicly traded companies and the average age of companies traded on exchanges.

Even within the tech industry, many startups that once relied on going public for funding are foregoing the immediate opportunity and seeking out private investors in order to maintain control over their operations and vision.

The markets have evolved, and traditional methods for analyzing and managing stock growth have become virtually impossible. With the potential of diminished returns on the horizon, many investors now place a premium on finding higher yields outside of traditional markets.

The Search for Alternative Investment Opportunities

This search for alternatives to public equities has remained a hallmark of Bo Parfet’s approach to investing. The underlying concept centers on a studied understanding of the overcrowding of traditional markets and urges diligent exploration of the whitespace that exists beyond the confines of the big exchanges. However, as Bo points out, the process is rife with obstacles to the average retail investor looking to diversify more traditional positions and add variety to their portfolio.

For instance, current SEC regulations of private offerings provide one notable barrier to entry. According to existing regulations, most private investment opportunities are limited to accredited investors — those who meet certain income stipulations or individuals with over $1 million in net worth, excluding the value of their home(s). While these regulations primarily exist to protect investors from fraudulent activity, they also have the secondary effect of tamping down access to opportunity to all but the world’s wealthiest investors.

And if that isn’t enough, those investments that were once thought of as alternative, such as real estate, hedge funds, infrastructure, and private debt, are becoming mainstream. As these investment areas become as saturated as the traditional stock market, Parfet indicates that realizing a return on profit will become ever  more challenging.

Parfet believes that your financial advisor should be working for you, to make a profit not based on the amount of assets you own but based on the performance of those assets. The approach that Parfet indicates investors must take is to seek out niche investments. Niche investments are those that have traditionally been overlooked but provide great growth potential.

Philosophy in Practice

Bo Parfet has developed his investment philosophy to move beyond the traditional markets and into niche investment opportunities. These are opportunities that are truly alternative, with the potential to provide higher rates of return as they are not yet developed within a saturated market.

One example is alternative credit. While companies have historically turned to banks to secure capital to fuel operations and growth, there has been a growing sentiment that these institutions are too bloated and/or bureaucratic. Increasingly, companies have turned to innovative supply chain finance options that avoid the major pitfalls of institutional creditors.

This type of finance allows a company to sell accounts receivable contracts to a third party at a reduced rate. The company is then able to increase its cash on hand during times of need and allows the third party to purchase high-quality debt at a discount. Often these contracts are between suppliers and larger corporations, so the contracts are considered to be relatively low risk.

While just one example, this goes to underscore the plethora of opportunities available to financial professionals who are willing to look outside the traditional lines to find quality alternatives that will only become more crucial to any successful portfolio over time.

About Bo Parfet

Bo Parfet is the Founder & CEO of Denali Venture Philanthropy, which he runs alongside his wife, Meredith Parfet. Denali Venture Philanthropy is an investment organization with a purpose, funding entrepreneurs who are committed to creating social change. The company operates on the mindset that all people are connected by universal human experience.

Prior to founding Denali Venture Philanthropy, Bo was the founder and Managing Principal at Iconic Development, a real estate development and investment company where he sourced, underwrote, developed and managed a portfolio in the multi-family and student housing space. Iconic Development was listed as an Inc 500 fastest growing company in 2012.

Early in his career Bo served as a Research Fellow at the Financial Accounting Standards Board (FASB), and worked on Wall Street as an investment banker in corporate finance for J.P. Morgan.

Bo is an accomplished mountaineer and explorer, and predicated on those experiences he authored the book, Die Trying: One Man’s Quest to Conquer the Seven Summits.

He is a member of the famed Explorers Club, contributing to the book, They Lived To Tell The Tale: True Stories of Modern Adventure from the Legendary Explorers Club.

Bo holds a Master’s Degree in Economics from the University of Michigan, an MBA from the Kellogg School of Management at Chicago’s Northwestern University, and a BS in Economics from Colorado State University.