Wealth manager uses circle of friends to boost endowment, foundation business
Running money managers' personal assets can be a bit daunting.
But that's just what London-based private investment office Partners Capital LLP does, and how in turn it has leveraged those personal connections into building an institutional business that has grown to about $3 billion as of Sept. 30, from $20 million at the end of 2004.
Total assets are about $6 billion, with money managers' private wealth constituting most of the other half of the assets for the firm, which provides endowment-model asset allocation services and access to best-in-class managers across all asset classes. Partners selectively adds tactical asset allocation and alpha/ beta separation to portfolios to further boost returns.
Partners CEO Stan Miranda says institutional clients — endowments and foundations (mostly small) and private wealth clients (most of whom are money managers) — feed off each other in what he calls a “virtuous circle”: money manager wealth clients who sit on boards or investment committees of foundations or endowments attract institutional clients. Also, Partners has added individuals as clients whose first interactions with the firm were in their roles on endowment and foundation boards and committees.
Mr. Miranda is mum on giving out names, but said most personal wealth clients are leaders of private equity and hedge fund firms looking to diversify away from the investments their companies make.
Clients of Partners Capital say Mr. Miranda isn't interested in high-profile clients as window dressing, but that there is a sense that he's recruiting people to become members of his investment club.
“Stan likes to have clients who contribute to the investment process itself,” said Jeremy Sillem, co-founder and managing partner of merchant bank Spencer House Partners LLP in London and a strategic adviser to Partners. He added that Mr. Miranda seeks out clients who are “very smart, provocative and stimulating” and who might be able to open doors to new managers: “I think he sees clients as a community.”
And having money managers as clients pushes Partners to improve because they are more demanding clients, said Barry Hedley, the former bursar at the University of Cambridge's Gonville and Caius College who, in 2004, hired Partners to oversee the college's £120 million ($200 million) endowment.Partners manages assets for about a dozen college endowments at Cambridge and the University of Oxford, including the £140 million Rhodes Trust at Oxford.
Tough is good
“Tough customers are very good for you,” said Mr. Hedley, who before Cambridge was a corporate strategy consultant. He counts the colleges of Oxford and Cambridge among Partners' “tough customers” because they need to take very deliberate steps to be allowed to invest in alternative assets.
Messrs. Hedley and Sillem are also personal wealth clients at Partners, as are most of the firm's shareholders and key advisers.
Partners Capital is among a handful of firms that aim to provide endowment-model asset allocation services and access to best-in-class managers across all asset classes.
While most financial services firms cut staff in 2009, Partners added 20 people — about 57% — to its front- and back-office staff.
The firm's five-year plan calls for growing assets to $20 billion to $30 billion, Mr. Miranda said.
Mr. Miranda has a lot of friends in the business — 77 of them signed on as wealth clients when he stepped down as director at Boston-based Bain & Co. Inc. and started Partners Capital in 2001. Paul Dimitruk co-founded Partners with Mr. Miranda and continues as chairman. He's also the founder and CEO of Los Angeles-based software company PortBlue Corp., and previously was the chairman and CEO of currency manager Pareto Partners, which is now a boutique within BNY Mellon Asset Management.
In fact, reading through Partners' pedigree is a bit like a “Six Degrees of Kevin Bacon” exercise. Serving with Mr. Dimitruk at Pareto was Christine Downton, who was a founding partner and chief investment officer. She now sits on the investment committee for Partners alongside John D. Lowenberg Sr., who is also the investment committee chairman of the $534 million Granville, Ohio-based Denison University endowment, where he sits alongside Mr. Dimitruk, who serves as a Denison University trustee and member of the endowment's investment committee.
In 2003, Mr. Miranda brought in two friends from Bain, John Collis and William Fox, and attorney John Hampel, who are now all partners at Partners.
When Partners backer Refco Group Ltd. LLC went bankrupt shortly after going public in 2005 as the result of an accounting scandal, Sir Ronald Cohen and Lord Jacob Rothschild — two of Britain's leading money managers — bought Refco's stake.
Mr. Cohen co-founded buyout firm Apax Partners LLP and the British Venture Capital Association and is chairman of Bridges Ventures, a social and environmental investment firm. Mr. Rothschild helped found Global Asset Management with Gilbert de Botton and St. James's Place PLC with Sir Mark Weinbergh.
But it's not his Rolodex that Mr. Miranda credits for Partners' recent asset growth; it's performance.
“First and foremost our strategy is to outperform any other multiasset-class manager in the world,” he said. The average annualized return in local currency terms of Partners' largest 25 clients was about 9% in the nine months through Sept. 30 and about 6% in the four years through Dec. 31, Mr. Miranda said.
He said he has to be careful with size because he doesn't want assets to grow faster than his capacity to find high-performing managers. “We think we have some headroom to grow toward the size of a Yale or other large U.S. endowment,” said Mr. Miranda.