Stanhope Capital’s chief investment officer, Jonathan Bell, says although the firm is of sufficient scale, it may consider acquisitions in the future as such transactions gather pace in the family office sector.
Bell (pictured) discusses why some companies have opted to merge since he was on the cover of Wealth Manager four years ago and talks through investment decisions that paid off in the long term.
How has the family office space changed in the last four years?
‘We have seen some mergers in our space, in terms of the multi-family offices. What seemed to happen in multi-family offices was a number [of firms] were not really of significant scale and have merged because I think you need larger scale.
‘So we have seen mergers among our competitors – firms like Fleming and Stonehage , and Sandaire and Lord North Street .
‘I think they needed to do it. You had a business that wasn't succeeding and therefore they need to merge. With Sandaire and Lord North, the jury is out on whether merging has worked. Stonehage Fleming is slightly different as it’s a bigger merger, Stonehage was successful and it acquired Fleming.
‘Given that this is a people business and if people leave, quite often the clients leave as well. Mergers always have that risk. So we will have to wait and see.’
Would you look to follow this trend and merge?
‘We are currently of sufficient scale and we are growing. We could look to add teams or to acquire a business perhaps.
‘Jewson Associates [acquired by Stanhope Capital in 2011] is just the sort of acquisition we could make again, if it fitted, but that is the route we would be going down.
‘The advantage you have got is that if you are a small company, because of the cost of regulation the economies of scale are really worthwhile, and just in terms of the number of people you need to do the right research.’
What have been your best and worst calls over the last four years?
‘We were an early investor in quality growth, but we reduced our quality growth about this time last year. In quoted markets quality growth was certainly the right place to be.
‘Our private equity and real estate investments have done very well and we have good IRRs [internal rates of return] of somewhere around 12% per annum.
‘We made the same mistake that other people made, which was that we did not have enough in long-dated bonds. We came out of long-dated bonds and of course, that would have been a great rally to have carried on benefiting from.'