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Beverly Chandler

Firm brings institutional approach to ultra-high net worths

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The three founding partners of private investment office Capital Generation Partners emerged from a family office, based in Switzerland in 2003. 

Managing partner Khaled Said and founding partner Charlotte Thorne explain that while they worked within the family office, representing a family on the buy side, they realised that there was a gap in the market for a firm that provided institutional quality advice to ultra-high net worth families.
 
Their firm launched in 2007, and now has USD2 billion under advice. Thorne says: “We felt that large families fall between two stools of being managed by the private client end of a bank and receiving a retail-plus type of service. I had assumed that a billion dollar plus family would be given an institutional level service in terms of what they were being provided with and that was not the case.”
 
They spotted the gap in the market but didn’t predict what was to come a couple of years later in the form of the global financial crisis. However, they spent those years of uncertainty battening down the hatches and building their infrastructure.
 
Said says: “We were a young firm and had one or two core clients who were loyal so we could take the time to build out our infrastructure without an aggressive growth plan.  We now have this institutional platform, robust processes and a team that matches that offering.”
 
The firm’s offering is based on funds because the firm wants to outsource expertise and internally there are no pooled products, each client gets a bespoke portfolio. Fees are charged on an assets-under-management basis point basis, not typically involving performance fees.
 
Thorne says: “We constructed a model where our minimum ticket size is USD50 million and we invest across all assets classes. We don’t have a chief investment officer model – there is not one person who sits on a cloud and pronounces – we have gone down a strict process driven route.”
 
Because of the model, Thorne says the origination team is able to go out globally looking for investment ideas and is free to focus on the managers.  
 
“All our clients are sophisticated investors so in theory they can invest in anything and everything” Thorne says.
 
Said adds: “We try to diversify across different assets classes and use our own classification system, called First Principles Diversification, to classify cash, bond and equity like strategies across the liquidity profile.. We aim to produce properly diversified portfolios but we take care not to overdiversify as we do not want to end up with portfolios which merely track markets”
 
In terms of performance, Said says that in consultation with the clients the firm knows where the upper return limits of their financial investments lie. “We are risk neutral but ultimately the clients build a strategy for their money and for what it is supposed to be used for and then an investment return is part of that strategy.”
 
The firm aims for a real return of 4-5 per cent for its ten clients, who have typical mandates of between USD100 and 200 million.
 
“We have very grown up conversations with our clients and spend a lot of time with intermediaries such as trustees and administrative representatives who provide a useful angle for us because they understand their clients and their clients’ needs” says Said.
 
Thorne agrees: “Often their lawyer or accountant has created all their structuring and our role is to make that structuring investable and make them look good. We like to work with them.”
 
In terms of the recent patch of volatility, Said says that while first and foremost they try to encourage their clients to be long term investors, so comfortable with volatility and price fluctuations, people want to know that they have done better than if they had gone for a passive approach to investment portfolios.
 
“Our clients’ portfolios have performed really well, in fact, because as equity markets were going up in value, we took the opinion that valuations were getting ahead of themselves and advised a strategy of selling some of the equities in February, March, April and May and going into cash and buying options on equities. It worked.”

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