How a 2019 breakaway is navigating the crisis

When Jason Fertitta led a team of wealth advisers out of Morgan Stanley last year to start Houston-based Americana Partners, the bull market was roaring and the price of oil -- integral to the fortunes of his rich Texas clients -- hovered at $66 a barrel. Now, equities are struggling, oil’s at about half that price and the world is fighting a pandemic.

Even so, Fertitta said he has no regrets about going independent after 19 years at financial services giants. He said he has a “large appetite for M&A” and wants to expand beyond offices in Houston, Dallas and Austin. Americana touched the $3 billion mark in assets before the pandemic, Fertitta said, and now manages around $2.6 billion.

He spoke with Bloomberg recently about how his firm is faring in the crisis. His comments have been edited and condensed.

Bloomberg: How do you prospect for new business at a time like this?

Jason Fertitta: It hasn’t been the most productive new client environment. Our Monday morning call with our chief investment officer, David Darst, has been a great prospecting tool. We’ve opened it to clients, and advisers invite people to participate. Employees and clients can ask questions. We’ve not lost one client in this downturn and opened three high-quality relationships over the past three weeks.

Bloomberg: Did most clients follow when you left Morgan Stanley?

JF: We’re in business with a lot of the clients we want to be in business with, and doing more business with them than we did at the bank. A handful we hoped would’ve come didn’t. They were in a lot of proprietary stuff with loans against it -- sophisticated loans on broad portfolios. Post-2008, these [portfolio loan accounts] became attached to accounts and the more the big banks are in your portfolio, the harder it is to move.

Bloomberg: What about clients with gas and oil holdings?

JF: For my whole career, as a result of having a client base that created their wealth in energy, our job has been to diversify them away from energy. That has helped in this downturn. But they are definitely feeling pain through direct investments in energy and exposure to companies they founded. In the real estate industry in Texas, we have a lot of landlords nervous about the rent checks coming in from energy companies.

Bloomberg: What is working in portfolios?

JF: Clients looking at their portfolios on a relative basis are seeing some of the biggest deltas between index and active management performance they’ve seen in years. The active managers we’ve been allocating to are outperforming substantially this year.

Polen Capital Management, for example, run by Dan Davidowitz, had terrific outperformance last year and is outperforming this year. One reason we really like Polen is that in 29 years they’ve never owned an energy stock, so that’s a natural diversifier for our clients.

Bloomberg: What are you advising now?

JF: For clients looking to put sizable cash to work, we’ve told them that if you have $10 million to invest in public equities, divide it into six tranches and let’s spend those bullets wisely. For most, we’ve spent two or three of those bullets and continue to wait for opportunities.

In alternatives, we’re seeing opportunities in the triple-net-lease area. If you own a building and have a tenant in a triple net lease, then, depending on the tenant’s credit quality, we think that’s a good place to be. [A triple net lease is one where the tenant covers not just rent, but costs including maintenance, taxes and insurance.]

We also like credit-focused private equity funds. In private credit, you’re getting better terms than you have for a while. Before, a private lender originated loans at 10% to 12%. Today you can get more like a mid-teen return.

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