MIRANDA DISRUPTING THE WHEELS OF FINANCE
Money manager is finding West Coast business is swift with his OCIO
MENLO PARK, CALIF. When Stan Miranda relocated from London last year, the money manager quickly realized that joining a club of aging, Lycra-wearing finance and technology executives who bike the mountains around Silicon Valley on Saturday mornings would be great for networking.
In an interview at a hotel bar in Menlo Park, Calif., Miranda recalled his first ride with the Over the Hill bike group. “There must have been US$5 billion of business there. The West Coast is ripe.”
Miranda co-founded Partners Capital in the U.K. in 2001 and developed a playbook that he has since exported to the U.S. and Asia. The idea is to build a network by managing money for rich individuals, then use those connections to win business from the elite endowments and foundations supported by those wealthy people.
Partners Capital, whose backers include British investment banker Lord Jacob Rothschild, has amassed US$24 billion worth of capital, half of it as an outsourced investment office, also known as OCIO, for non-profits.
The high-net-worth scene in Silicon Valley is totally different from those in London and New York. Over the last two decades, the tech hub has turned thousands of young engineers and computer scientists into millionaires and billionaires, creating a potential client base for the wealth management industry of suddenly rich entrepreneurs. As the number of billionaires in the Bay Area has surged, so, too, has the population of family offices and multi-family offices in the area, such as Iconiq Capital, which manages money for top executives at Facebook, including Mark Zuckerberg and Sheryl Sandberg.
Partners Capital, however, isn’t focused on Silicon Valley’s young elite. It’s targeting those who’ve helped finance the tech boom — venture capitalists and private-equity executives who also sit on the boards of foundations and endowments. The firm plans to open an office in San Francisco next year, spurred by the expansion of its West Coast business, which now accounts for about US$2 billion worth of its assets in the U.S. and includes clients such as the Museum of Contemporary Art in Los Angeles and the Seaver Institute.
Partners Capital’s strategy for turning single clients into institutional-size opportunities isn’t unprecedented in asset management. It shows how lines blur between family offices and OCIOS, which manage the entire portfolios of institutions. San Francisco-based Hall Capital Partners opened in 1994 to oversee the fortunes of those such as private-equity innovator Warren Hellman, but morphed into a national firm with more than US$30 billion in assets and clients such as Bates College in Maine.
Competition is fierce for those making the leap to outsourcing. Barriers to entry are almost nonexistent. The industry is booming with OCIO assets in the U.S. expected to grow 40 per cent by 2021 to US$1.7 trillion, according to consulting firm Deloitte. The number of companies vying for business include bulge-bracket banks like Goldman Sachs Group Inc., consultants like Mercer and startups.
“It is still a bit of a Wild West,” Anna Dunn Tabke, a principal at Alpha Capital Management, an outsourcing consulting firm in Atlanta, said of the OCIO business. “There is no industry standard yet. You just have to build a model and see if anyone will pay for it.”
Big banks and consultants dominate outsourcing for pensions because they have the scale to oversee huge portfolios. While endowments and foundations are still a bit of a free-for-all, the more elite clients tend to hire what are usually described as boutique firms, which is where Partners Capital competes.
Outsourcers vying for the elites include Strategic Investment Group, which last year won a bid to manage Barnard College’s Us$327-million endowment, and Perella Weinberg Partners, which was tapped by the New York Botanical Garden this year to oversee its Us$320-million fund.
Partners Capital’s assets have almost doubled in about five years. New clients include the Metropolitan Opera in New York, which hired the firm last year to oversee US$465 million.
Partners Capital was founded in London by Miranda and financial executive Paul Dimitruk, who was his neighbour. American expats, the two shared a frustration with the money management skills of private banks. They were intrigued by the idea, popularized by Yale endowment manager David Swensen, that institutional investors could make more money shifting out of liquid stocks and bonds and into illiquid assets.
Miranda, who was a director at Bain & Co., had left the Boston-based consulting firm after spending 19 years there.
Partners Capital initially targeted wealthy individuals, specifically upper management at Bain & Co. His big break came when Rothschild took a stake in Partners Capital along with Sir Ronald Cohen, an early venture capitalist.
The firm opened its doors to institutions in Europe that were beginning to embrace the Yale endowment model, including Eton College, the elite boarding school that Rothschild attended. “Stan was attracted to the endowment model,” said Cohen, who co-founded Apax Partners, one of England’s first venture-capital firms. “It seemed to me this was going to be the future.”
Partners Capital employed a similar strategy in the U.S. out of its Boston office, managing money for wealthy individuals through Miranda’s Bain & Co. network, which led to clients such as Milton Academy in Massachusetts and the Cancer Research Institute in New York. With Partners Capital’s West Coast clientele and investments growing, Miranda bought a home in Woodside, Calif., so he can split his time between the U.K. and U.S. overseeing the firm’s expansion.
In Silicon Valley, Miranda is working closely with people such as Geoff Rehnert, who helped start Bain Capital and is co-founder of private-equity company Audax Group, which has offices in Boston, New York and San Francisco. Rehnert, who invited Miranda to join the cycling club in Woodside, thinks the newcomer will have plenty of business.
“A lot of folks are senior in their firms and getting ready to retire,” Rehnert said. “It’s very well suited to Stan’s model.”
Bloomberg