The GPs’ GP heads east

Partners Capital, a London- and Boston-based investment office, is about to plant its first flag in Asia.

Partners Capital – not to be confused with Switzerland-headquartered private markets giant Partners Group – is, to simplify somewhat, a general partner for general partners: a private investment office for investment professionals.

The firm was co-founded by Stan Miranda, a former senior partner with Bain & Company and Evolution Global Partners, an affiliate of venture firm Kleiner Perkins, and Paul Dimitruk, a former securities lawyer who has helped established or held senior management positions at a number of asset management firms, such as Pareto Partners, General Atlantic and Investcorp.

Miranda and Dimitruk established the business to allow general partners at the leading private equity firms to “outsource their own family endowments”. And an endowment is the right term. Some clients will have assets upwards of $500 million: “More than can be spent in a lifetime,” says Miranda.

Private equity professionals are “consistent” in the way they manage their capital, says Miranda. Typically they will arrive at Partners with their assets in a “barbell” strategy, with a significant amount of cash at one end and an overexposure to their own firm – whether it be through the funds, the partnership or the listed stock – at the other.

Partners seeks, therefore, to take the cash and spread it into other areas, “into everything they don’t already have”: absolute return hedge funds, emerging markets (both private equity and other asset classes), commodities, property (away from their own markets) and other specialist private equity funds.

In establishing the firm’s investment model, the founders looked to the managers of their most admired endowment for inspiration. “At that point in time [2001] which was the one LP you would really wanted above all others in your investor base?” Miranda asks rhetorically. “Yale.” The Yale Model, as developed by David Swensen, chief investment officer of the university’s $17 billion investment portfolio, and defined in his book Pioneering Portfolio Management, was what Partners Capital wanted to bring to the personal endowments of individuals in the private equity industry.

Today the firm advises more than $6 billion in assets, split equally between high net worth individuals – mostly from the world of private equity and hedge fund management – and institutional money. Among the institutional clients are 12 Oxford and Cambridge colleges, Eton, the UK-based independent school, and a number of museums and charitable foundations. Among the individuals in the client base are partners from Bain Capital, The Blackstone Group, Summit Partners, Kohlberg Kravis Roberts, Apax Partners, Cinven, Permira and BC Partners.

Individuals on the client roster include Sir Ronald Cohen, founder of Apax Partners and Bridges Ventures, and Richard DeMartini, a partner and managing director at Crestview Partners.  

The establishment of an office in Hong Kong is not primarily motivated to open doors to new investment opportunities. “There are very few hidden funds that we can’t already get access to,” says Miranda. The reason for this, he says is that most of the original investors in or founders of Asian funds had European or American roots, including fund managers like Flemings, Fidelity, Schroders, Odey, Sloane Robinson, Tiger, Ashmore, and others”  and are therefore relatively well known to many investors.  “This is changing, however”, adds Miranda, “as many more indigenous managers are gaining traction and building institutional quality asset management businesses; and hence the need to now be on the ground in Asia.”

That said the new location will be a useful base for the investment team. Partners Capital’s “master portfolio” is 30 percent invested in Asia across all asset classes. 

The primary reason for opening in Asia is to market Partners’ services to Asian investors, says Miranda.
The firm has hired its first Hong Kong-based employee, due to start in mid-November, when the Hong Kong company has been officially formed. Registration with the local authorities is expected to be complete by the beginning of February.