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Hall Road Investments #45 (Family Office Sherpa, Index & ESG)

The Sherpa Update

Simple – I have published another article on Simple, this one delving into the task of selecting suppliers, how the family office should start getting more granular with costs and some of our more effective methods of gaining insights into the current infrastructure.

One of the catalysts for writing the article comes from this report from UBS published in 2019 which details the costs of operating a family office in APAC. Part of Hall Road’s value proposition is reducing the bps costs of infrastructure and as this article shows, there is myriad ways to start that process.

Evans and Partners – 360 Capital released its intentions for the business should it be successful in its takeover. Like Macquarie with its recent US purchase, it’s taking the asset management business and holding only a cornerstone (distribution beachhead) in the wealth management and capital markets portfolio which is will offload to another party. Not that dissimilar to the UBS/Crestone model which will give 360 Capital access to the wealth clients for raising funds, without taking on the admin and compliance burden.

As pointed out last year, the revenue for Crestone was high but the margin is thin. For 360, the hope is that that E&P funds management name isn’t mud despite connections to the US property funds shemozzle.

Tanarra Capital – John Wylie’s alternative asset management firm is ramping up operations with an announcement they are seeking $1.5bn from insto and wholesale. The firm targets long term value, private equity, private credit and venture capital.

In an interview with the AFR, one thing the firm is attempting is to make Aussie public companies more globally relevant. He used the term Long Term Value Improvement a lot – a nicer way of saying activist investor?

Howard Marks – his latest memo was very interesting and breaks down the value vs growth argument and how this focus may not serve investors well in this environment. I’ll let you read the note as it’s worth the time – it’s full of historical context and brings home the point that investing in today’s market is not the same as Buffet or Graham and you have to view it through the lens of a new world.

Beckon Capital – Ex BT fixed income colleagues Phil Moffitt, David Nolan and Chris Selth have launched an impact investing business targeting “worthy” private businesses that may be struggling to take advantage of cheap money due to their size and market knowledge. They are looking to raise $150M. In an interview with the AFR, they described themselves as a “fintech merchant bank” that leans on tech to identify opportunities for investment which is a bit confusing.

Robinhood – recent research points to Chinese retail clients moving away from stock picking and into managed funds. I wonder if the recent uptick in the US for stock trading will go the same way when they realise how hard it actually is to maintain long term gains? Keep an eye on Reddit’s Wall Streetbets for the white flags to start.

Barra/Zenith – Zenith will start using analytics from MSCI’s Barra platform as they move more and more into the investment consulting sphere. This is in line with JANA and Frontier both looking to take some of the adviser model market that until now was dominated by a few boutiques such as InvestSense and larger, more established business like Lonsec.

Norwegian Oil Fund – a great insight into the new head of this $1.7 trillion sovereign wealth fund from the AFR. I was especially interested to see how they run the asset allocation at the parliamentary level with the head of investments only having very small “active” bands to enhance performance. A lot of detail on how it’s more like a giant index fund that is now turning “enhanced” and all the potential issues that may cause.

A great read for anyone looking at the endowment model.

Indexing and ETFs

Hyperion – has finally bitten the bullet and taking advantage of recent outperformance, is launching an open-ended listed version of their global strategy in March. As transaction costs keep going down, the argument for unlisted, close ended LICs or non-rebated co-mingled trusts gets harder.

Direct Indexing – the arguments for direct indexing grow stronger in the US as the benefits of zero brokerage and technology from the likes of SS&C (Black Diamond) and Parametric making rebalancing trading and tracking calculation easier. I think this is a really important juncture for advice to family offices that are looking at Beta with a twist as we wait for zero brokerage to hit local stocks.

ESG & Philanthropy

Takeovers – if you own or work for an ESG/Impact etc fund manager or tech provider get ready to start working for the larger asset managers. Blackrock has added another tech supplier to Aladdin, Nuveen is buying renewable energy fund manager Glennmont, Perpetual has tied up Trillium (and filled my Linkedin Feed with adverts) and the amount of ESG/SDG/Impact related launches and transactions will only get bigger.



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