Stanhope Capital makes its case for the ‘private investment office’
For some in the wealth management business, the term “multi-family office” connotes plenty of cachet. Think of Stonehage Fleming Family Partners, or MJ & Cie, or Sandaire.
But at Stanhope Capital, they prefer to call themselves – and think of themselves – as a “private investment office,” according to Simon Paul, pictured, one of the firm’s client advisory partners.
(Paul, in fact, is in the unique position of having worked at a senior level for two of the small number of wealth management firms in London that could have legitimately called themselves MFOs, but both prefer the private investment office identity, the other being Sandaire, which re-branded after its merger with fellow capital-dweller Lord North Street.)
Just why MFO has become a somewhat unfashionable term among those working and traveling in international wealth management circles is perhaps as challenging an undertaking as attempting to define the term “family office” itself – or indeed, trying to nail the difference between an MFO and a private investment office.
One supposes that the “multi-” prefix makes some clients think they are not sufficiently pampered, relative to those who are looked after by a “single” family office.
Asked to elaborate on previous comments by fellow Stanhope partner and chief investment officer, Jonathan Bell, that family offices might in some way connote a lack of serious investment expertise, Simon Paul says it may have something to do with the fact that a “PIO” sounds, to those in the know, more sophisticated and more of a proper, functioning, hands-on manager of money than “SFO” has come to suggest.
“SFOs are essentially governing and administrative units for very wealthy families, and for the most part they outsource management of liquid assets to private banks, private investment offices or MFOs,” says Paul.
Founded: 2004 by Daniel Pinto,
“Hardly any of the growing number of SFOs being set up in London handle investment management in-house.”
There have been a number of boutiques set up by former private bankers, or individuals with a private client investment management background, in recent years, but Paul believes that many of these will struggle to achieve critical mass.
“Typically they will spend all their time looking after existing clients, rather than managing and growing the business, and in times of volatility, private clients tend not to move,” he says.
“In some cases these businesses will be folded back into a private bank or a larger, more successful boutique.”
Paul also suggests that there are very few true MFOs in London, even though, at the same time, private investment offices have generally been unsuccessful in terms of growth, particularly in the area of pulling business away from the private banks.
This is in spite of the fact that there seems to be a certain cachet that the “private investment office” is beginning to take on.
Ross Elder, co-founder and managing partner of Lincoln Private Investment Office, notes that private investment offices reflect the business model of private client stockbrokers, avoiding the high cost structure of a typical single family office (SFO), and the complexities of an MFO, where the investments of the founding family or families are perceived – rightly or wrongly – to get more attention than other investors.
US$9.5bn in assets
Whatever you choose to call it, there’s no question that Stanhope Capital, which currently is looking after just shy of $10bn in assets after 12 years in business, is flourishing.
Founded in 2004 by Daniel Pinto and Julien Sevaux, it now comprises 13 partners, more than 75 employees, and operates from offices in London, Geneva and, since last year, Jersey.
While the “Stanhope Capital” name suggests that a family named Stanhope might have been an important client in the firm’s early days, in fact it comes from the name of the street in London’s Mayfair district in which the business had its first offices, which it shared with Bessemer Trust.
In 2011, it acquired Jewson Associates, which is now a subsidiary charity consultancy called Stanhope Consulting.
Paul came to Stanhope in May 2013, after working for various private banks (including Kleinwort Benson, Barclays, Schroders and HSBC). His last non-Stanhope job was with Sandaire, where he headed up the firm’s client relationship’s operations.
Speaking from Stanhope’s offices now located in London’s historic and leafy Portman Square, just around the corner from the retail bustle of Oxford Street, Paul describes what he sees as a steadily shifting wealth management landscape for individuals and families in the HNW and UHNW categories.
The ‘family office consultancy’
For example, he notes, the family office consultancy, like the private investment office, is another emerging area. Such consultancies have as their raison d’être the setting up of meetings between wealthy individuals and organisations that manage money.
“These individuals are very important to a business like ours, and we have spent a lot of time getting to know them,” says Paul.
“There is a place in the market for this type of business, but again it will be challenging, since there are already a number of family office consultants in London.”
Indeed, whether it’s a family office, a multi-family office, a private investment office or a family office consultancy, business is never easy, for anyone, Paul and others attest.
At Stanhope, it was the realisation that the firm would have to start looking at other areas – namely, private equity and commercial property – for returns that motivated it to appoint a new head of private funds last year, Edward Clive, and to set up a series of feeder funds.
According to Paul, clients are attracted by the ability to invest without having to assume any responsibility for the operations of the fund.
“For example, our first property feeder fund (which has a European focus) will invest in limited partner-type structures,” he says, referring to the kind of arrangement that characterises private equity deals.
“The funds have started in the US$50m segment, and there will probably be a new fund each year.
“While public markets are struggling, we expect these asset classes to continue to deliver decent returns, with carefully selected managers.”
Key new hires
Stanhope was particularly active on the recruitment front last spring, with Nigel Holley (founder of Maven Private Office) joining in March, to develop the firm’s relationships with families and trustees.
The following month, it hired Jerome Sibony as head of direct investments with a remit to source investment opportunities in the private equity market, while Edward Clive, previously a senior director in the firm’s investment research department, was handed responsibility for running private funds.
Paul explains that Sibony was brought on board to look at investment in private family companies. “Some of our clients – alongside their more liquid investments – like the idea of getting access to opportunities to invest in successful, interesting family businesses.”
Among its other operations, Stanhope also has a small merchant banking team that undertakes M&A for family companies, and sits alongside the private family company business, Paul continues.
“This means that if we are approached by a family that wants to raise capital to fund the growth of their business, we have capital on the other side of the business, and can ‘match-make’. We expect this type of activity to grow, and we also want to develop our merchant banking business, which should in turn create new wealth management opportunities.”
Stanhope’s Jersey outpost was opened last year, to add to its London and Geneva offices.
“We need booking centres to cater for a disparate client base,” explains Paul. “While half of our clients are UK-resident or -domiciled, a quarter are French and another 25% are from other parts of the world, which is a more international profile than most of our competitors.”
The Channel Islands is obviously appealing for clients want to have a contract with an offshore centre, but it is also home to a large number of international trust businesses – which, as it happens, are increasingly useful introducers for the type of business Stanhope is looking to participate in.
This story originally appeared in the May issue of International Investment.