CLIENT BRIEF

• Client: The Maroun family
• Source of wealth: Global family business specializing in commercial cleaning services
• Situation: Desire to institutionalize investments while continuing to run the operating business and lay the governance foundation for a generational transition
• CA relationship: Discretionary total portfolio management, with family consent required for all private investment decisions

As his wealth grew over the years, Amir used multiple private banks to manage his money, generally directing them towards conservative investments. This somewhat narrow perspective served neither the family nor its wealth well and failed to reflect a comprehensive investment strategy, leverage new opportunities following market corrections, or address the need for a long-term family succession plan.

Amir had several children who became involved in the family business as they got older. After earning a master’s degree, the oldest son, Karim, assumed responsibility for business-related investments. As he became more immersed in the investing community, Karim realized his family was lacking a professionalized approach to managing and growing its wealth. With his father’s support, he began looking for an investment firm that worked with multigenerational families and found CA.

CLIENT NEEDS

The Maroun family wished to institutionalize its investment approach with a firm that offered:

• Development of a diversified growth portfolio, with liquidity for potential future acquisitions or investments
• Extensive private investment experience and knowledge
• A formal, tailored investment governance process to streamline and strategize decision making
• Expertise in the generational transfer of wealth

SOLUTION

Karim’s first point of contact at CA was Carolyn, a managing director, who met with the Marouns to detail CA’s investment and governance experience with families of significant wealth.

She also introduced the family to a CA Investment Director, Navneet, who had extensive experience working with multigenerational families with operating business holdings. Navneet explained CA’s approach to advising private families and building institutional-quality portfolios, as well as the differences between discretionary and non-discretionary management relationships.

Understanding that he would be actively involved in the family business, and that his father was pulling back his involvement in investment decision making, Karim advocated for a discretionary approach. The family would be actively informed on portfolio considerations, but the CA team would ultimately have decision-making power, and would execute all portfolio investments.

After a CA analysis demonstrated the incremental return potential possible through private investing as compared to public market investing, Karim saw the value of building a large, strategic PI allocation, which included the sectors related to the family’s operating business. This synergistic strategy also offered the family an opportunity to glimpse the steps involved in readying private businesses for listing – a potential future path for select business units. The resultant growth portfolio included the following allocation: 50% private investments, 10% public equities, 25% diversifiers, and 15% macro hedge. As the business generated income every year, cash was added to the portfolio in a systematic, thoughtful way.

OUTCOME

The Maroun family retained one banking relationship for its general and business banking needs, and consolidated all investment management to CA. The children have assumed more active roles the management of the business, and family investment decisions have successfully transitioned to the IC. Amir has gained confidence in the investment approach and the value of a more inclusive family wealth decision-making framework.

The CA team continues to work closely with the Marouns, discussing trades, sharing opinions on asset managers, and otherwise meeting the family’s investment and governance needs in a strategic, collaborative manner. Consequently, Karim now concentrates on growing the family business while the CA team focuses on growing the family’s wealth, generating meaningful performance, and strengthening the family’s legacy.

This narrative has been fictionalized to ensure anonymity, but is based on actual client work.

The post Case Study: How intentional governance drove investment opportunities for a global family business appeared first on Cambridge Associates.

CLIENT BRIEF

• Client: The MacArthur family
• Source of wealth: General partner at a venture capital firm
• Situation: Seeking an investment firm to put an organized plan around the family’s assets
• CA relationship: Non-discretionary portfolio management

Shannon felt that a disciplined asset allocation process could enhance the quality of her personal investment portfolio, which lacked a clear strategy and structure because she hadn’t had time to approach it systematically. At the time, she was still an active GP and managed her own private allocation. However, she anticipated winding down her role with the VC firm in the next few years, at which point she might ultimately need a sounding board and support for private investing. Her assets were in two pools, one for her and the other a trust for her adult children and their families.

As a GP, Shannon was familiar with CA’s investment approach, especially the rigor of its due diligence processes. She also knew CA from her participation on the board of a local museum that CA advised. She initially came to Cambridge Associates seeking oversight of her public investment portfolio, which she had previously managed on her own.

CLIENT NEEDS

Shannon was looking for an investment firm with:

• Thoughtful strategy and asset allocation guidance: An approach that would help achieve the family’s portfolio growth goals over time
• Private investing depth: Global experience and skill in private investments, and exposure to networks of general and limited partners that could complement her own relationships
• A sophisticated and flexible service approach: A relationship that could change to meet the needs of her portfolio as it evolves over time
• Experience working with GPs as clients: A team that aligned with her status as a sophisticated investor, understood her strengths, and could augment in areas less familiar to her

SOLUTION

As part of CA’s Family Enterprise Review, Jeremy, the investment director overseeing Shannon’s dedicated CA team, conducted an analysis of the family’s current investment holdings and cash flow needs^[1].

Reviewing the existing portfolios, Jeremy noticed that the holdings and asset allocations of the two portfolios were not well aligned with the family’s risk-return goals. Shannon’s portfolio was overweight in cash and fixed income, and the equity allocation was overly tilted toward US large-cap companies. The family’s trust was also overly conservative, given the long-term time horizon of this multi-generational portfolio. Shannon’s team at CA made recommendations for a growth-oriented asset allocation and institutional-quality liquid investment managers (equity, fixed income and hedge funds) to implement the portfolio strategy. As Shannon chose to have a non-discretionary relationship with CA, she had input and final say on all portfolio decisions.

After several years, Shannon began to withdraw from day-to-day management of the VC firm, and wished to build a broader private investment portfolio to take advantage of her greater liquidity. She asked CA to act as her advisor in this new chapter. Although she retained positions in funds with her VC firm, she sought to expand her private portfolio across sectors geographies, and stages. Through her own network–built over many years in the industry–Shannon had access to opportunities of which she had extensive knowledge. However, she looked to CA for insights into investments, including rigorous due diligence, where she had less exposure.

As the relationship was expanding to focus more on private investing, Jeremy added a private investment specialist, Beth, to the team. Beth helped Shannon think strategically about her goals for her private investment portfolio, how private investing fit into her overall portfolio strategy, and how to diversify her investments in a thoughtful and deliberate manner. Further, Beth provided insights into commitment, pacing, expectations for distributions, and cash flow modeling, which gave the portfolio a better foundation for new opportunities.

Beth suggested investments that complemented those available through Shannon’s network and that aligned with the goals of the portfolio. In doing so, she was able to introduce Shannon to GPs and investment opportunities outside of Shannon’s own sphere, and provide the due diligence needed to make informed investment decisions.

OUTCOME

Shannon feels confident in her overall portfolio strategy, including the total asset allocation framework. As the strategy expanded to include private investments, Jeremy, Beth and Shannon communicate frequently, with many discussions tied to fundraising cycles and new opportunities.

This narrative has been fictionalized to ensure anonymity, but is based on actual client work.

[1] For more information on Cambridge Associates’ Family Enterprise Review, refer to Portfolio Construction: A Blueprint for Private Families.

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CLIENT BRIEF

• Client: Hahn family
• Source of wealth: Manufacturing (inherited wealth)
• Situation: Family members with distinct and differing portfolio requirements
• CA relationship: Non-discretionary

The family’s assets were invested across four portfolios—one for the parents, one each for the two children, and one for the family foundation—and the respective “owners” had differing investment preferences, especially as related to Sustainable and Impact Investing (SII).[1] Given the family’s stature within its industry, investment opportunities often were presented to them, but many were not of institutional quality. Assessing them thoroughly was challenging for the family’s investment staff, a process made even more difficult by the varying portfolio interests of each family member.

One of the sons, Charlie, and his wife, Anne, were especially interested in incorporating SII into their portfolio. Charlie had previously met Melissa Jones, an investment director within Cambridge Associates’ (CA’s) SII team, and reached out to her to learn more about the firm’s capabilities.

CLIENT NEEDS

While Charlie and Anne’s environmental and social interests were the catalyst, the other family members joined the initial conversations with CA, as they recognized that their diverse needs were straining the resources of their family office.

Collectively, the family sought:

• Expertise in SII
• Access to institutional-quality investments and to experienced investment specialists across all asset classes who could source and thoroughly evaluate opportunities
• Ability to customize portfolios to reflect each underlying asset owner’s goals and priorities
• Ability to make and implement investment decisions in coordination with family office staff

SOLUTION

Melissa introduced the Hahn family and the family office to Jane, an investment director within CA’s Private Client Practice, so that, in addition to SII expertise, the family’s investment team included family investing experience. In discovery conversations with the Hahn family, Jane and her team learned about each family member’s goals. These input sessions included a full Family Enterprise Review, which enabled the CA team to gain a complete sense of the key issues that would inform investment policy setting and, later, implementation. This included reviewing the family financial ecosystem, long-term goals and intentions, spending needs and cash flow patterns, return objectives, risk and volatility guidelines, and tax and legal considerations.[2]

For the portfolios where SII would be incorporated, these intake sessions also included asking about each portfolio owner’s purpose, priorities, and principles—the “three Ps” CA employs to help define the why, what, and how of each investor’s unique SII portfolio. With Charlie and Anne, for example, this involved learning about their motivations, the values they wanted to advance through their investments, and their risk appetite and return objectives. Through these discussions, Charlie and Anne expressed their principle of avoiding investments that “harmed the world,” outlined their specific views on areas such as pharmaceuticals, animal testing, and sustainability, and expressed their return expectations. CA used this valuable input to formulate the couple’s investment strategy and policy framework and, subsequently, to identify specific investment opportunities. The parents, their second son, Brian, and the collective family on behalf of the foundation experienced a similar discovery process with CA. The family was impressed by CA’s Global Investment Research team—including its dedicated SII team of more than 12 professionals and its private investing team of more than 100 professionals—and the quality and depth of their manager due-diligence capabilities.

Following the discovery process, it was decided that Charlie and Anne’s portfolio, as well as that of the family foundation, would be managed as fully integrated SII portfolios. The parents’ portfolio would instead adopt an “opportunistic” approach of incorporating SII allocations when they appeared the most attractive, creating a hybrid portfolio within their non-SII portfolio. As Brian did not feel strongly about SII, he retained a diversified portfolio that intentionally did not incorporate SII.[3]

Over the next three years, the CA investment team worked to build out each of the family’s portfolios. The family office oversaw portfolio execution, given the non-discretionary relationship, so Jane and Melissa worked closely with them in sharing manager diligence and recommendations, as well as overall portfolio allocations.

Family Portfolio Asset Allocations
Ordered from most SII integration to least

For Illustrative Purposes Only

OUTCOME

Given the family office’s limited resources, Charlie, Anne, and Brian had thought that they would have to accept the parents’ approach to investing. Talking with CA made them realize that, with CA’s help, their individual preferences could be incorporated in their respective portfolios while all family members could benefit from the investment resources of CA’s global platform, and the Hahn family office could receive much-needed support.

The family is happy that each member’s preferences and goals are reflected in their individual portfolios, and that they are able to access high-quality investment opportunities that have been subject to detailed due diligence. Now that Charlie, Anne, and Brian feel they have more control and influence over their portfolio strategy, they have become more engaged in investing and more understanding of the decisions made for their individual portfolios. Through this process, the parents have gained confidence in their children’s investment knowledge and, thus, in their ability to steward the family’s wealth in the future.

This narrative has been fictionalized to ensure anonymity, but is based on actual client work.

[1] Sustainable and Impact Investing (SII) incorporates environmental, social, and governance (ESG) investments as well as impact investments.

[2] For more information on Cambridge Associates’ Family Enterprise Review, refer to Portfolio Construction: A Blueprint for Private Families.

[3] Note: Cambridge Associates’ global research and investment teams look at all investment opportunities through the lens of SII, not just for managers who have self-selected as ESG or Impact.

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CLIENT BRIEF

• Client: Whitlock family
• Source of wealth: Legacy family real estate investments
• Situation: Seeking a portfolio strategy that serves the interests of multiple generations
• CA relationship: Discretionary portfolio management

The mother, Jane, was the family’s financial decision-maker, but her children—having reached their 40s and in the midst of building families of their own—wanted to become more involved in managing the family’s wealth. After investing in a local startup, one of the daughters became intrigued by the opportunity to capitalize on new and emerging innovation to boost the return potential of investments. She wondered if there was a place for this type of investing for the family more broadly, and if the family’s current providers were capable of, or experienced in, private investing for families. A period of market volatility spurred the second generation’s concern further, causing them to wonder if the family’s assets were receiving the sophisticated thinking and hands-on management they needed.

CLIENT NEEDS

The Whitlock family asked Patrick, their estate planning attorney and trusted friend, to help them find a firm that could provide:

• Strategic investment guidance: An objective assessment of the family’s investment approach and its fit to the family’s objectives
• Access to a more sophisticated, broader set of investment ideas: Advice on, and exposure to, more global private and public investment opportunities
• Family wealth experience: An understanding of private clients, and experience in working with multiple generations, especially those who intend to transition decision making
• Personal and trustworthy counsel: A trusted sounding board and partner for both the parents and children, and a direct relationship with the person making investment decisions for their portfolio

Through his own professional advisor network, Patrick was familiar with Cambridge Associates (CA) and our expertise working with family investors. He introduced the Whitlocks to Daniel, an Investment Director at CA.

OUR SOLUTION

After a series of exploratory meetings, Daniel took on the role of lead Investment Director for the Whitlocks’ dedicated CA team. With other members of this team, Daniel conducted a full Family Enterprise Review, which entailed an extensive assessment of the Whitlocks’ family wealth ecosystem, including their assets; investment structures and vehicles; goals and interests; spending and cashflow requirements; time horizons and risk tolerance; family wealth decision-making and governance structure; and operational needs. (See Portfolio Construction: A Blueprint for Private Families for additional insight into how we build portfolios and our family enterprise review process.)

During the enterprise review and conversations with the family, Daniel understood that Jane’s preference for a larger allocation to safer, more conservative, investment choices was rooted in her desire to preserve the family’s wealth for future generations. However, in running several scenarios and spending analyses with the family’s assets, Daniel was able to demonstrate that, for the Whitlocks’ expanding family (including grandchildren) to enjoy such opportunities, the family’s wealth would need to grow significantly more than could reasonably be expected of their existing portfolio approach. While this conservative approach had been seen as the surest way to protect and preserve wealth, the CA team’s thorough explanation and in-depth scenario testing helped reveal that such an approach would likely instead erode wealth over time, especially as the wealth was disbursed across multiple family members.

Through their discussions with Daniel and his team, the Whitlocks learned about opportunities to compound their wealth at a higher rate without significantly increasing their risk profile, while still maintaining enough liquidity and a balance of risk-mitigating assets to weather an extended market downturn. CA recommended a portfolio structure of 75% equities, including new allocations to private assets, and 25% in protection and safety-oriented assets.

In addition, Daniel highlighted for the family how combining their trusts into a pooled family investment vehicle could not only provide cost savings and other efficiencies, but also the scale needed to access institutional-quality investment opportunities to support long-term growth targets. Otherwise, asset levels from individual trusts would have been too small to be attractive to most top-tier private equity and venture managers. The family’s investment committee was then formed to include both generations of family members. As part of this process, Jane appreciated CA’s help in educating the next generation on the full extent of the family’s wealth, which she had been uncertain of how to communicate on her own. She found the enterprise review process useful in clearly and objectively sharing this information, and the next generation’s role in governance of the LLC as the ideal way to engage her children in the responsibilities of significant wealth ownership.

OUTCOME

The parents are happy that their children are taking a more active role in the family’s finances and that the new asset allocation is designed to improve the likelihood that future generations can enjoy the same financial security that the core family members have experienced. The family has enjoyed the opportunity to learn more about active investing in both public and private markets, and the benefits of a hands-on approach to managing their family’s wealth.

Looking ahead, the family is progressing toward its targeted positions in venture capital and private equity investments. On the safety- and protection-oriented side of the portfolio, Daniel has established fixed income and hedge fund positions designed to provide diversification and volatility reduction benefits, especially during times of market dislocation. Outside of transitioning the investment portfolio to CA, the family is becoming more active in its philanthropic ventures, with the next generation expanding their roles in the family’s charitable giving and considering creating a family foundation.

This narrative has been fictionalized to ensure anonymity, but is based on actual client work.

The post Case Study: Building an investment strategy to better serve multiple generations appeared first on Cambridge Associates.

CLIENT BRIEF

• Client: The Cervasio Family Office
• Source of wealth: Consulting business
• Situation: Seeking an advisor for US private fund allocation
• CA relationship: Non-discretionary portfolio management

Through the family’s standing in the industry and regional community of business owners, the Cervasio’s family office (FO) began making direct investments years earlier, primarily in their home markets. Their approach emphasized relationship-driven dealmaking and a willingness to commit long-term capital to attractive growth opportunities. The family’s portfolio focused mainly on these direct investments—specifically those with a minority stake. They also maintained a small portfolio of private investment funds. While their primary interest remained in direct opportunities, they knew a more diversified fund portfolio could potentially provide more attractive returns and exposure to underrepresented sectors and geographies, and help them expand their connections to a broader set of general partners (GPs).

CLIENT NEEDS

The family and the FO wished to expand their private investment portfolio to include a fund allocation that would complement their direct investments and globalize their investment exposure, beginning with the US. They knew they would need the help of a private investment firm with US expertise to augment their in-house resources, arrange fund manager introductions, advise on portfolio construction, and make manager recommendations. Another Cambridge Associates (CA) client recommended CA upon learning the Cervasio FO was seeking an investment firm with:

• Extensive experience and knowledge of the US private fund market
• Access to top-tier, deeply researched, manager opportunities and a reputation among GPs for having high-quality limited partner (LP) clients
• The ability to look holistically at the family’s total private investment portfolio and ensure that the US-focused fund mandate would complement and reflect their overall strategic goals and philosophy
• The flexibility to adapt to the needs of the family, its board, and its FO—both at the outset of the relationship and into the future

OUR SOLUTION

As a non-discretionary advisor, our ability to add value to the investment team overseeing the entire portfolio was as important as the fund-specific strategy we would build. Lucas, a Managing Director with CA, took lead responsibility for the relationship, overseeing a dedicated CA team that worked to support the goals of the family and its FO.

We understood the client had two objectives for the US funds portfolio: to complement the objectives set for their direct portfolio and to maximize returns. With that in mind, we proposed an initial US allocation with a growth equity tilt, as well as some venture capital and buyout strategies. To build out the portfolio, we recommended specific managers based on rigorous research and due diligence. Lucas then facilitated meetings between recommended managers and the client. As the client approved the managers and committed to funds, the family’s US portfolio began to take shape.

During the fund allocation process, CA’s investment insights, support of the FO’s broader mandate, and success in adopting the Cervasio’s investment philosophy helped establish the foundation for a decades-long partnership between the CA investment team and the FO.

Several years into the relationship—driven both by the results of the fund portfolio managed by CA and the desire for greater exposure to growth assets—the Cervasio family board decided to enhance and expand its portfolio strategy to incorporate co-investments alongside its managers. We advised the FO team on due diligence best practices to support that effort and discussed portfolio realignment options. Lucas was invited to present CA’s strategic recommendations to the board. His proposal to position the fund portfolio to be an important source of future co-invest opportunities was well received and subsequently adopted. From there, CA developed US fund manager replacement recommendations based on growth, return, and co-investment relationship potential. Drawing on our global manager network, CA also began introducing the client to select non-US fund managers that fit these criteria.

OUTCOME

Our relationship with the Cervasio family has evolved into one of mutual trust and professional respect. Our non-discretionary role now goes beyond the original US fund mandate to include strategic guidance to the Cervasio board and serving as a de facto member of the family office investment team. Lucas and the Cervasio FO are currently engaged in discussions with the Cervasio board on a variety of topics, including ways to strengthen their ESG focus across the private investment total portfolio; resetting budget and commitment targets to align with allocations across direct investments, funds, and co-investments; building additional exposure to certain sectors; and opportunities to balance the total portfolio’s geographic and sector exposures.

The Cervasios engaged Cambridge Associates to advise them on a small part of their private investment portfolio that was not their main area of focus. As their portfolio developed, they ended up getting much more: a relationship conduit for their co-invest program; a growth engine for the rest of their portfolio; and strategic counsel on their broader investment efforts.

This narrative has been fictionalized to ensure anonymity, but is based on actual client work.

The post Case Study: How a fund portfolio fueled investment opportunities for a family’s total portfolio appeared first on Cambridge Associates.

CLIENT BRIEF

• Client: The Liu Family
• Source of wealth: Operating business with an environmental mission
• Situation: Seeking a new advisor for private investment ESG portfolio
• CA relationship: Discretionary portfolio management

Today, the wealth is managed by the second generation in coordination with an established family office (FO). The family is very focused on advancing an environmental, social, and corporate governance (ESG) mission that supports the principles outlined in the UN’s Sustainable Development Goals (SDG) and fully embodies the family’s value system and business history.

Client Needs

The Lius knew they needed specialized professional guidance to develop, implement, and manage a private ESG portfolio. They had a well-defined investment plan in place for the total portfolio, but wanted a firm with strength in ESG and private investing to meet the return objectives in that allocation. Through a collaborative effort, the Lius and their FO conducted a search for an investment organization with the following needs in mind:

• Embodiment of family values: an investment team with the ability and willingness to understand the values and principles that made the family unique, reflected not just in a customized strategy, but in the way the team served the client.
• ESG expertise and industry scale: a firm with extensive research and investment resources, and the presence within the impact investing community to be an influential advocate for driving better incorporation of ESG and sustainable principles in the investment industry.
• A diversified private ESG portfolio without return concessions: the ability to deliver on the family’s objective of a fully diversified private portfolio that reflected their stated values—as expressed through alignment with the UN SDGs—without compromising on return objectives.
• Constituent management: the capacity to respond to the family’s complex governance and reporting ecosystem and a communication approach that recognized the relationship encompassed a broad constituent group including trustees and FO investment staff as well as the family itself.

Our Solution

We understood from the outset that, for the Lius, our ability to build trust with their FO investment staff and other key advisors was just as important as delivering an investment program that furthered their family’s values. Johan, a Managing Director with Cambridge Associates (CA), kept this in mind as he took lead responsibility for the relationship and for directing the work of the Liu’s dedicated CA investment team.

To ensure that all needs were met, this team worked with the Lius and its FO staff to formalize governance parameters for the relationship. They then developed an investment strategy that aligned with the Lius’ values and portfolio objectives.

The team engaged in a series of in-depth sessions with the family and staff to discuss CA’s ESG investment philosophy, research platform, and investment decision-making process. They had productive discussions about the challenges of understanding private investment risk at both the manager and security levels, and why the risk profiles of mission-aligned portfolios are not necessarily greater than those of more traditional strategies—just different and less familiar. CA’s participation in quarterly family board meetings provided an opportunity to communicate with trustees and other family advisors about our ESG approach and demonstrate how its strategy would support the family’s mission without compromising on returns.

As the team began introducing the Lius to manager ideas, Johan outlined a framework for understanding and defining each investment’s role in the portfolio and in furthering the family’s values. Through this framework, each investment would be evaluated and assigned to a category–driving change, contributing, or neutral–and its categorization would indicate the extent to which it would advance the ESG mandate. For instance, specific sub-sectors, such as distressed assets, may lower the risk exposure of a highly mission-aligned portfolio even if the available investment opportunities may not accelerate a specific sustainability goal. Thus, such an investment could fall into the neutral category yet still advance the Lius’ overall mission by contributing to a more favorable risk/return profile for the total portfolio.

The team also explained how CA’s research approach is designed to uncover ESG opportunities across the full spectrum of private sectors and does not look at managers in an absolute “yes or no” framework. Every manager and fund that CA’s research team evaluates is viewed through a holistic lens that focuses on the structural influence of the strategy on ESG or impact themes. This approach to due diligence gave the Lius confidence that CA had the influence and reach required to amplify the family’s mission and values.

Outcome

In addition to formal quarterly reviews at the family board meetings, we provide trustees with periodic updates and ad hoc progress reports that illustrate how our ESG framework advances the family’s mission and return objectives. As the portfolio build-out period advances, the family is devoting most of their time to initiatives that promote their mission. The CA team continues to advocate for the principles embodied in the Lius’ mission as it engages in manager meetings, industry conferences, and research efforts. It also continues to communicate with the FO and its staff to ensure that they fully understand the nuances of all investment parameters, operations, and decisions. While the relationship remains discretionary, it has evolved into a rewarding professional alliance dedicated to helping the Liu family make the world a better, more sustainable place.

This narrative has been fictionalized to ensure anonymity, but is based on actual client work.

The post Case Study: Furthering a family’s ESG mission in a private investments portfolio appeared first on Cambridge Associates.

CLIENT BRIEF

• Client: Ian and Laura Duncan
• Source of wealth: Global enterprise
• Situation: Liquidity event
• CA relationship: Non-discretionary portfolio management

The couple decided the moment was right to sell the business and arranged a $500 million cash sale, retaining a 5% stake to ensure a smooth transition to the new owners. They relied on Richard, their long-time business accountant and trusted friend, to help identify the right investment firm to manage the proceeds.

CLIENT NEEDS

The Duncans came to Cambridge Associates looking for a stable, fully resourced investment organization with a strong commitment to partnership. Their ultimate goal was to delegate management so they could pursue their personal interests. However, much as they had done with the sale of their business, they wanted to maintain some involvement so that they could feel comfortable with the firm and the investment process.

As with many successful business owners, the Duncans’ expectations drew heavily from the management approach and values they brought to their own company, and included:

• Quality Ideas and Service: They had been leaders in their field—they expected investment ideas and service that were top notch and matched their high standards.
• People and Accountability: They not only wanted a firm that provided objective advice but also a relationship with experienced investors who would be focused on the family’s best interests, accountable for decisions, and who included Richard as part of the team.
• Transparency and Ownership: A previous advisor had invested the Duncans’ assets in the firm’s proprietary venture fund without fully disclosing its restrictive exit terms. The fund also had disappointing performance. With this experience in mind, ownership of their assets, and visibility and influence into decision making, were essential.
• Risk Control: Having dedicated decades to building their business and taken great financial risk along the way, the Duncans wanted a portfolio strategy that minimized risk and offered greater peace of mind.

OUR SOLUTION

We understood from the outset that, for the Duncans, the quality and nature of our partnership was as important as meeting their investment objectives. Christine, a Managing Director with CA, kept this in mind as she took lead responsibility for the relationship and for directing the work of the Duncans’ dedicated investment team.

To begin the partnership, this team worked with the couple and Richard to formalize governance parameters for the relationship. They then developed an investment strategy that aligned with the Duncans’ risk and return objectives.

Understanding our clients’ low tolerance for risk, we agreed that a relatively conservative return target should be maintained in Year One, and that the team would build—as the foundation of the strategy—a portfolio focused on core protection and growth. This was expressed as the phase 1 portfolio strategy. This strategy was then documented in the Duncans’ Investment Policy Statement, which summarized goals, risk tolerance, and return expectations, as well as the portfolio strategy and governance parameters.

We then arranged for Ian and Richard to join their CA team to meet with active equity managers in our network and included them in the rigorous process we use to select the most appropriate candidates for investment. With specific strategies and managers confirmed, and as a further risk mitigation measure in light of market volatility, the investment team developed an implementation plan that would deploy cash over several quarters.

After the first annual review meeting with the family and Richard, the Duncans confirmed their level of confidence in the program. They also concluded that reaching for higher return was within their reassessed risk tolerance range and would enable them to more fully realize their future philanthropic and legacy intentions. With that in mind, the CA team recommended both building out the core protection and growth component and introducing diversifying investments, including hedge funds and a small private investment allocation. In recommending this phase 2 plan, the team also explained how the Duncans would retain full ownership of the assets in their private investment portfolio, as opposed to what had occurred with their previous advisor’s fund. Consistent with established governance practices, Richard and Ian were then involved in meeting with all new manager candidates.

In a subsequent discussion, the Duncans confirmed their comfort level in moving to phase 3, which involved further deploying some of their remaining cash into a 15% allocation to private investments, to be achieved over a three-year timeframe.

OUTCOME

The Duncans were very pleased with their phased approach. It gave Richard and the Duncans an opportunity to gain a deeper understanding of each component of their investment strategy and how it contributed to the whole, and helped strengthen the bonds of trust necessary for an enduring partnership.

Five years later, the portfolio strategy remains aligned with the investment objectives. It has preserved the family’s capital and delivered steady growth through periods of economic expansion, market volatility, and global uncertainty. Through ongoing communications, the CA team has developed a true partnership with Richard and the Duncans. Richard and Ian continue to participate in periodic meetings with our network of global managers to discuss macro trends affecting the economy and how manager ideas could best serve their investment program. Laura is now spending most of her time spearheading multiple initiatives to identify, mentor, and support the next generation of women entrepreneurs.

This narrative has been fictionalized to ensure anonymity, but is based on actual client work.

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