Review of Kayne Anderson Rudnick Investment Management 2021

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Updated on Thursday, August 12, 2021

Headquartered in Los Angeles, Kayne Anderson Rudnick Investment Management provides investment and wealth management services to individuals and institutions. It typically requires an investment of at least $1 million for general wealth management services, though requirements vary by program and client type. The firm also manages and advises mutual funds, including some funds under the branding of its owner, Virtus Investment Partners.

The bottom line: Kayne Anderson Rudnick Investment Management is a Los Angeles-based investment firm that serves individuals as well as a range of institutions.

  • Requires a $1 million minimum for wealth advisory services
  • Offers several mutual funds under the Virtus branding
  • Potential for conflicts of interest related to performance-based fees
Assets under management: $39,581,789,253
Minimum investment: Varies by program
Individual investor to advisor ratio: 51:1
Fee structure: A percentage of AUM, fixed fees, performance-based fees
Headquarters: 1800 Avenue of the Stars, Second Floor
Los Angeles, CA 90067
Website:www.kayne.com
Phone: 800-231-7414

All information included in this profile is accurate as of August 3, 2021. For more information, please consult Kayne Anderson Rudnick’s website.

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Overview of Kayne Anderson Rudnick

Kayne Anderson Rudnick opened its doors in 1984 to manage money for its founders, including John Anderson, a self-made billionaire. The firm now offers portfolio management and financial planning services for individual and institutional investors. The firm employs over 90 people, including around 30 who perform investment advisory functions.

The firm is owned by Virtus Investment Partners, Inc., a publicly traded asset management business.

A look at the founders of Kayne Anderson Rudnick

Kayne Anderson Rudnick was founded by entrepreneurs John Anderson and Richard Kayne.

Anderson was an attorney and investor in financial services businesses after whom the business school at the University of California, Los Angeles, was named. He died in 2011 at the age of 93. Kanye was a principal at Cantor Fitzgerald & Company prior to founding the firm. In his role at Cantor Fitzgerald & Company, Kayne managed private accounts, a hedge fund and a portion of firm capital.

In 1989, Allan Rudnick joined the firm as another co-founder. Before joining, he was chief investment officer for The Pilgrim Group, where he oversaw equity and fixed-income mutual funds.

Kayne Anderson Rudnick’s pros

  • Transparent fee structure and competitive rates: Kayne Anderson Rudnick publishes a fee schedule for its advisory clients, and its highest rate, which applies to assets under management of up to $3 million, is 1%. Above that amount, rates decrease. Given that the standard annual fee among investment advisory firms ranges from 0.50% to 1.25% of assets under management, a maximum rate of 1% is relatively good.
  • Conducts its own research: When making investment decisions, Kayne Anderson Rudnick relies primarily on its own internal research. The team speaks with company management teams, customers, competitors and others to form their own unique opinions, helping to shape the firm’s investment strategies.
  • National recognition for track record: The team’s advisors and some of the firm’s strategies have earned high marks on coveted industry lists. For the past four years, the firm’s managing director, Spuds Powell, has ranked No. 1 on Barron’s list of top 100 independent financial advisors, which factors in quality of practice, assets under management and revenue generated. In December 2020, the firm received the PSN Top Guns Manager of the Decade recognition from Informa Investment Solutions for several of its investment strategies. Additionally, Kayne Anderson Rudnick as a whole ranks in the Financial Times list of Top 300 Registered Investment Advisors.

Kayne Anderson Rudnick’s cons

  • High account minimums: The firm typically requires a minimum investment of $1 million for wealth advisory clients, making it a stretch for many investors. However, the firm says it may accept smaller accounts at its discretion, for an extra fee. KAR also offers a wrap fee program with much lower minimums, ranging from $50,000 to $250,000.
  • Less focus on financial planning than investment management: The firm offers financial planning at no added cost. But only 51 to 100 clients tapped the firm’s financial planning resources during the last year, according to the firm’s Form ADV. Also, the recommendations you receive may come from outside parties and not the Kayne Anderson Rudnick team itself.
  • Potential conflict of interest: Kayne Anderson Rudnick sometimes charges performance-based fees based on a share of capital gains or capital appreciation of a client’s assets. This could lead to a conflict of interest due to a potential favoring of accounts that will levy performance fees, rather than standard-fee accounts. The firm does work on mitigating this issue by following procedures designed to ensure performance-based accounts are not favored. Clients should still be aware of this potential conflict of interest.

What types of clients does Kayne Anderson Rudnick serve?

Kayne Anderson Rudnick works with a range of clients, serving individuals who both are and are not considered high net worth. (For reference, the SEC defines a high net worth individual as someone with at least $750,000 under management or a net worth of at least $1.5 million).

For individuals to open an account directly with the firm, they would need to invest at least $1 million, although there are exceptions. The firm notes that the minimum annual fee is $10,000, and if clients fall below this annual minimum, they must pay $2,500 every quarter.

Kayne Anderson Rudnick also serves as advisor or sub-advisor for wrap accounts sponsored by certain financial institutions. In fact, the majority of the firm’s clients are discretionary wrap account clients. The minimum investment for this type of account usually ranges from $50,000 to $250,000.

Services offered by Kayne Anderson Rudnick

Kayne Anderson Rudnick provides investment management services, as well as financial planning advice. Advisors usually are given discretion to make decisions about what and when to trade, without getting client approval first.

The firm also works with executive clients who have received significant equity grants as part of their compensation, and it helps nonprofits with investment strategy and research. The team may consult outside business partners in certain situations, such as for customized estate planning, tax planning and insurance services.

Kayne Anderson Rudnick also offers other services to clients indirectly. You may invest in a mutual fund advised by or managed by the firm, including roughly 20 funds affiliated with the firm’s owner, Virtus Investment Partners. Or you may select one of Kayne Anderson Rudnick’s model strategies in your wrap account. Under this type of wrap program, offered by firms such as Charles Schwab, you receive advisory, custodial and brokerage services, including trading costs, bundled under one fee.

To recap, services offered by Kayne Anderson Rudnick include:

  • Portfolio management and investment advisory services
  • Financial planning
    • Retirement planning
    • Estate planning and wealth transfer
    • Charitable planning
    • Tax planning and management
    • Cash flow forecasting
    • Insurance/risk management
  • Executive services for clients with significant equity grants
    • Tax-managed portfolio transition services
    • Hedging services
    • Exchange fund solutions
  • Mutual fund management and advisory services
  • Consulting services for nonprofits linked to private clients

How Kayne Anderson Rudnick invests your money

For each private wealth client, Kayne Anderson Rudnick creates a customized portfolio that takes into account the client’s long-term goals as well as the team’s future market expectations. The firm notes that it builds “high-conviction” portfolios that include 25 to 50 different securities. Its goal is to mitigate risk by investing in securities that it believes are high-quality and well-positioned, rather than simply through diversification. On average, the firm holds investments for 36 to 60 months.

Kayne Anderson Rudnick offers a number of proprietary equity and fixed income investment strategies, including those that are both passive and active, as well as access to outside managers. When developing its proprietary strategies, the team at Kayne Anderson Rudnick relies primarily on its own research, and looks for a long list of specific characteristics in a company to determine if it has a competitive advantage.

Fees Kayne Anderson Rudnick charges for its services

How much you’ll pay to work with Kayne Anderson Rudnick depends on the amount you’re investing with the firm, since it offers a tiered fee schedule. Private wealth clients will pay a percentage of their AUM, ranging from 1.00% for the first $3 million invested, then dropping to 0.60% on amounts beyond $10 million, as outlined in the table below:

Kayne Anderson Rudnick Wealth Advisory Fee Schedule
Assets under advisementAnnual fee
First $3 million1.00%
Next $2 million0.80%
Next $5 million0.70%
Additional assets0.60%

In addition to the rates outlined above, clients with separately managed accounts can expect to pay an additional 0.30% each year. Keep in mind that on top of fees paid to Kayne Anderson Rudnick to manage your portfolio, you still could owe brokerage commissions, transaction fees and other related costs and expenses.

The firm may also levy performance-based fees, based on a share of capital gains or capital appreciation of a client’s assets. However, the firm notes that this arrangement only will apply to certain clients and is negotiated on an individual basis.

Kayne Anderson Rudnick disciplinary disclosures

Over the past 10 years, Kayne Anderson Rudnick discloses two disciplinary events, both of which stem from the financial supervisory authority in Norway. In July 2018, the firm was fined $18,500 the authority in Norway because it was determined that it had not disclosed its share in a Norwegian company in a timely manner. The firm was fined a second time, in June 2021, for the same issue; in this case, it paid a fine of approximately $23,000.

Since Kayne Anderson Rudnick is an investment advisor registered with the SEC, it’s required to disclose on its Form ADV all material facts regarding legal or disciplinary events that could impact a client’s evaluation of the firm or the integrity of its management team. For more information, visit Kayne Anderson Rudnick’s IAPD page.

Kayne Anderson Rudnick onboarding process

To reach out to Kayne Anderson Rudnick, you can fill out this form on its website, which requests the following information:

  • Whether you’re interested in wealth management or investment management
  • Your name
  • Your email
  • Your phone number
  • Your organization, if any
  • A message about how the firm can help you

If you establish a relationship directly with Kayne Anderson Rudnick, as opposed to through a mutual fund the firm manages, you can expect to meet with the firm at least once a year, and sometimes quarterly if requested. Clients can expect to receive reports at least quarterly laying out their holdings and performance, as well as any relevant tax details.

Where Kayne Anderson Rudnick is located

Kayne Anderson Rudnick has offices in the following locations:

  • Los Angeles
  • San Francisco
  • Newport Beach, California
  • Westlake Village, California
  • Broomfield, Colorado
  • Salt Lake City
  • Boston
  • Quincy, Massachusetts
  • Scottsdale, Arizona
  • Seattle
  • Providence, Rhode Island
  • Maitland, Florida

Is Kayne Anderson Rudnick right for you?

Kayne Anderson Rudnick is well-regarded for its equity strategies. It conducts its own original research on companies it’s considering for investment, including talking to company management, customers and competitors, and has identified a standardized list of characteristics it seeks out when hunting for prospects.

As for its client list, the firm aims to help wealthy individuals, families and institutions manage their portfolios and plan for their financial futures. Investors who fall short of the typical $1 million minimum investment required for wealth advisory services may not make the cut to become a client, although there are exceptions made for an extra fee. You may want to look elsewhere, too, if you’re primarily looking for a financial plan and not portfolio management, as the firm provides financial planning to only a small number of its clients.

Finding a financial advisor is a personal decision. Be sure to research multiple firms to ensure you find the right advisor for you.

The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.