Only six managed the feat, in fact — those that did said the gains mostly came from expanded client rosters and smart investment choices
InvestmentNews' quarterly snapshot of the top 50 registered investment advisory firms reveals, as Al Gore might say, an inconvenient truth. Making the right investment choices, holding on to clients and boosting assets remains a tricky proposition.
Consider this: Only six firms, or 12%, among the largest RIAs increased assets from the fourth quarter of 2008 to the fourth quarter of 2009, according to research conducted for InvestmentNews by RIA Database. The data is taken right from firms' ADV forms, which are updated annually and as needed, so the data is not perfectly timely. But as a measure of which firms are growing — and how quickly — it's a good indicator.
All told, combined assets for the top 50 RIAs topped $132 billion last quarter — a 15% increase from the fourth quarter of 2008. Total assets were also up by about $2 billion, from $130.3 billion, from the third quarter of '09.
The largest firms, like GenSpring Family Offices LLC, Veritable LP and Silvercrest Asset Management Group LLC, remained in the top three positions on the top 50 list — exactly where they've been a number of quarters running. These firms, led by GenSpring with $15.5 billion in assets, hold an aggregate $31 billion, or 23%, of the assets for the top 50. Veritable had $7.6 billion in assets and Silvercrest had $7.9 billion.
You have to go the fourth-largest company, SCS Capital Management LLC, to find a firm that actually recorded a hike in assets from the fourth quarter of 2008 to the fourth quarter of '09.
SCS Capital chief executive Peter Mattoon commented in an e-mail that the increase at his firm was mainly due to adding more clients. And indeed, the data shows that SCS now has 104 discretionary accounts, up from 82 in the fourth quarter of 2008.
Two other firms in the top 50 — Luminous Capital LLC and Ballentine Partners LLC — saw double-digit increases in assets. Luminous Capital increased assets by about a third from the fourth quarter of 2008 to the same period last year (from $1.8 billion to $2.4 billion), and added 20% more discretionary accounts, up to 1,345. Likewise, Ballentine Partners (formerly Ballentine Finn & Co. Inc.) saw a jump of 29% in assets, to $2.5 billion, and a corresponding increase of 66% in accounts, to 2,023.
Not surprisingly, executives at those firms said the surge in assets was due to a bump-up in new accounts, coupled with solid investment performance. “What we can say is that we've had growth from market movement, and also from new clients that we've added,” Ballentine Partners senior client adviser Coventry Edwards-Pitt said in an interview.
It's also notable that many of the firms that demonstrated growth are in the multifamily office category, according to Bob Casey, senior managing director for research at the Family Wealth Alliance, an advisory firm. “Multifamily offices continue to add assets,” he said.
Ballentine, with offices in Waltham, Mass. and Wolfeboro, N.H., is a multifamily office catering to ultra-high-net worth clients with $20 million and more in investible assets. During the market downturn, however, that minimum proved too high. So about two years ago, Ballentine added another division, Mill Street Investment Management, to serve clients with at least $3 million in investible assets.
“We were finding that a lot of family and friends of clients didn't fit neatly into our minimums box,” Ms. Edwards-Pitt said. “We were having to refer them elsewhere, and we felt like it would be nice to keep the whole family together. And, because there was pent-up demand, and because the market had fallen so much that other clients who would have been at a higher minimum fell into that category, there are more clients now in the $3 million to $20 million area than there used to be. That's been a big driver of our growth.”
In 2009, Ms. Edwards-Pitt said, Mill Street welcomed 20 new clients, and about 10 were moved over from Ballentine Partners.
For Luminous Capital LLC, a firm formed in May 2008 as a breakaway from Merrill Lynch & Co. Inc., the bulk of the increase in assets was due to new clients, who have at least $10 million in investible assets. But the firm also grew from performance, adding $215 million in market gains in 2009, according to partner Kim Ip.
Distressed debt has been a particularly rich field for the firm, she noted, given the generous supply of bank debt and bargain basement prices.
“Our best performing assets have been in the distressed credit category, both distressed mortgages, and distressed corporate credit” Ms. Ip said. “We kept our allocation to equities very low, and we chose to put our risk budget in distressed credit. And it's where we continue to allocate capital today.”
In the specialized field of distressed debt, it's critical to find managers who really understand the value behind the assets, Ms. Ip said.
“It all comes down to the managers,” she said. “The investor is naming their price, and we like that dynamic. It provides an outsized opportunity.”
