Cambridge Associates, the Boston-based consulting firm best known for its work with leading U.S. endowments and foundations, is anticipating strong business growth in an Asia-Pacific market where endowments and foundations are as rare as hen’s teeth.
David Druley, Cambridge Associates’ chairman and CEO, said in an interview in Singapore that the firm is picking up business in the region now from two other client segments: a fast-growing universe of ultra-high-net-worth family offices and big institutional investors, including national pension plans, sovereign wealth funds and insurance companies.
Asia-Pacific clients are a small but growing chunk of the firm’s business, accounting for roughly 70 of the firm’s worldwide roster of 1,100 clients, up from less than 10 at the end of 2006, a Boston-based spokeswoman for Cambridge said in an email.
Cambridge was founded a little more than 40 years ago as an endowment and foundation shop, but today private clients and pension funds are about “half of our business, and that’s where we see significant opportunity here” in Asia, said Mr. Druley.
“We’ll keep investing” in the firm’s offices in Singapore, Beijing and Sydney “to execute and make that happen,” including a senior hire in the coming year or so to help work with ultra-high-net-worth families in China and surrounding areas, said Mr. Druley.
A big “reason I’m in the area” — on the last leg of a three-week tour that took him to Tokyo, Beijing, Hong Kong and Mumbai before Singapore and a final stop in Sydney — “is because you’re seeing a real movement over the last few years in China (of) private clients forming family offices and starting to look more like Western ultra-high-net-worth clients.”
When they reach that point, “they start turning to us to help invest their portfolios” in an outsourced chief investment officer capacity, said Mr. Druley.
While that trend is a regional one, China stands out in terms of the scale of the opportunity. A generation of entrepreneurs in Asia, in particular those that made China’s economy the world’s second biggest, is increasingly looking to the U.S. and Europe for ideas on “how best to structure their own internal family offices, and how to invest,” noted Mr. Druley.
“We’re starting to see a real acceleration” in the thinking of those wealth creators about “what they’ll look like when they don’t have all their money invested in operating businesses,” he said.
One focus of those entrepreneurs has been on potential conflicts of interest, which Mr. Druley contends plays to Cambridge’s strengths as a privately held firm offering clients customized portfolios rather than proprietary funds of funds products.
The Cambridge spokeswoman said private clients account for roughly 25% of the firm's Asia-Pacific client base and 28% of its revenues. Almost three-quarters of those private clients started working with Cambridge over the past five years, while revenues from that client segment have grown at an annualized clip of 21% over that period.
Cambridge expects that high-net-worth market segment in the region to grow strongly.
Unlike in the U.S. and Europe, where a family office would typically hire one OCIO to oversee its entire portfolio, at present an ultra-high-net-worth investor or family office in Asia will often give more than one outsourcing firm a few hundred million dollars each, looking to learn how each invests, noted Alvin Tay, Cambridge’s Singapore-based managing director and head of Asia, in the same interview.
In that context, the hope is that as ultra-high-net-worth clients “gain more confidence in our approach,” they’ll give Cambridge more of their portfolios to manage, he said.