February 16, 2023
In this episode of the Global Investment Leaders podcast, Rosemont CEO Chas Burkhart is joined by Maribeth Rahe, president and chief executive officer of Fort Washington Investment Advisors, Inc. As one of the largest investment advisors in Ohio with approximately $72 billion* in assets under management, the firm provides professional and comprehensive asset management services for institutions, corporations, insurance companies, mutual fund providers, foundations, endowments and high-net-worth individuals.
During their conversation, Burkhart and Rahe discussed:
- How being a wholly owned subsidiary of Western & Southern Financial Group has benefited Fort Washington and how the background and values of the leadership of Western & Southern have created alignment between the two companies
- Rahe’s approach to inorganic growth and her creative ways of determining if a firm is a cultural fit with the potential for a long-term partnership
- The asset classes where Rahe is seeing increased demand in the short-term
- The trends in the industry that Rahe is watching, including the return to in-person work and its impact on mentorship and leadership development
At the conclusion of their conversation, Rahe provided her insights on the factors that have contributed to Fort Washington’s decades of stable and sustainable growth. “This year will be the 135th anniversary of our parent company Western & Southern Financial. We’ve grown sustainably over those years. We’re long-term investors, we believe in long time horizons, and we believe in career paths for our individuals,” Rahe shared. “We don’t follow the latest fad and we do what we think is right for the business.”
All episodes of the Global Investment Leaders podcast are available on Apple Podcasts, Spotify, Google Podcasts and more. Receive the episodes as soon as they premiere by subscribing today.
*Approximate AUM for Fort Washington Investment Advisors at the time of recording.
February 2, 2023
Last month’s inaugural How They Did It podcast featured our interview with Leeward Investments CEO Todd Vingers on his firm’s successful management buyout from its parent company, LMCG. Leeward—a Boston-based US value equity manager with roughly $2.7 billion under management—was the value franchise within LMCG, a subsidiary of City National/RBC before Todd and his partners completed an MBO early last year.
Leeward’s successful MBO is one of a small number in recent years, and a potentially helpful example for others contemplating a similar move. Most would-be MBOs stall out, snagging on one gating issue or another. Often the management leaders don’t have the determination or capability to make it happen, or there isn’t a sufficiently cohesive group to establish a standalone business. Perhaps a price can’t be reached, or the parent is obstinate, or the clients’ business can’t be neatly carved out. There are myriad execution challenges and risks that might be too daunting for either side to accept. A lot has to go right.
So what did we learn from Leeward’s experience? There are a few takeaways worth keeping in mind.
1. It helps to have a willing seller. Threatening to walk out might bring a parent to the negotiating table, but it likely means high risk and scorched earth. The odds of a minimally disruptive negotiation are much higher if both parties see potential merit in a separation. In Leeward’s case, City National/RBC was looking to divest non-strategic assets. In others, there may be room for an ongoing relationship, perhaps managing parent assets or contracting parent resources. Thinking about benefits to the seller can be a good way to grease the wheels.
2. Price setting can take time. Often parties come to the negotiating table with unproductive expectations, and all kinds of biases are at play (self-serving, confirmation, anchoring, recency, etc.). Narrowing the bid/ask spread likely requires a cocktail of negotiation, education and patience (and perhaps, at times, an actual cocktail). We all want to make things happen and move forward, but in this context patience is an advantage. For Leeward, the steady drumbeat of interest combined with its solid investment and business performance allowed it to hang around the hoop until the conditions were right.
3. Perseverance matters. Not only can price setting take time, but there are likely to be myriad obstacles that get in the way. Perhaps a business setback, an uncooperative colleague, or a difficult negotiation. Todd didn’t share any major obstacles beyond price setting, but we’ve seen others run into roadblocks and quit trying and we’ve seen some with the fortitude to push through. Bottom line is if you don’t want it badly enough, you likely won’t get it.
4. Personnel continuity and full functional excellence is key. Whether it’s an MBO, a lift-out or a walk-out, odds of success highly correlate to keeping most or all of the key people and to having highly capable people in key roles. Too often we see investment teams or financial advisors attempt to peel off, with little regard for the other legs of the stool and proper infrastructure. Leeward was smart/lucky/both to have all the right people at their prior firm come along. No doubt this enhanced client confidence in the company’s ability to execute on its own, and getting out of the gate with the client base largely intact undoubtedly keeps them out of the penalty box and bolsters viability.
Every MBO is going to look different, but these are some of the basic principles underneath the successful ones. We’ll have another MBO example to share in the next How They Did It episode in March. In the meantime, let us know what you learned from the Leeward episode, or from your own experiences and observations. If you haven’t yet listened to our conversation with Todd Vingers, you can find it here.
January 19, 2023
As we shared at the end of the year, the Global Investment Leaders podcast is expanding to include a new sub-series called How They Did It, hosted by Rosemont Managing Director Brad Mook. How They Did It will feature bi-monthly interviews with industry leaders about how they solved certain strategic challenges. Our goal is to tap the insights of our network of industry insiders to help others that may be facing similar challenges.
The first episode of the How They Did It sub-series discusses management buyouts, or MBOs, which are rarely successfully executed in the modern investment industry. In this episode, Mook interviews Todd Vingers, CFA, who serves as president of the recently launched Leeward Investments, a Boston-based institutionally-focused long-only equity manager featuring US small-, SMID-, and mid-cap value strategies. In their conversation, Mook asked Vingers about the context, motivation and mechanics behind Leeward’s MBO. While many would like to spin out or buy out their franchise, it is often harder than it looks and there is little in the way of guidance with how to proceed.
To help those who may be considering becoming independent of a parent organization, Vingers shared about his background at his prior firm, LMCG, where he spent 20 years establishing and building the value team. Mook and Vingers also discussed the many factors Vingers and his partners considered when forming Leeward, including:
- What led Vingers and his partners to seek independence, despite having a successful business and significant resources and infrastructure
- How evolving into a 100% employee-owned entity opened up opportunities that were not available under the previous ownership structure
- The extended timeline to reach a negotiated transaction with their parent organization and why they did not consider other alternatives
- The key issues coming out of the negotiation, from people to pricing to the structure of the deal
- The critical components of setting up Leeward to be an immediate success, including which functions remained in-house and which were outsourced
- The strategy Vingers and his team used to communicate the transition to clients, which led to 93% revenue retention
All episodes of the Global Investment Leaders podcast are available on Apple Podcasts, Spotify, Google Podcasts and more. Receive the episodes as soon as they premiere by subscribing today.
December 20, 2022
In this special year-end episode of the Global Investment Leaders podcast, Rosemont CEO Chas Burkhart is joined by Rosemont Managing Director Brad Mook for a conversation about the challenges and opportunities investment management firms are facing in today’s environment. From their unique vantage point of partnering with many firms over multiple market cycles, Burkhart and Mook discuss:
- Deal activity in the industry and how the market dynamics have changed for both wealth management and asset management deal-making
- Challenges management teams of investment businesses face in today’s uncertain, rising-rate environment, including managing expenses, acquiring and retaining talent, and ensuring alignment among team members
- Their advice for those considering starting their own firms from scratch or going independent, and alternate options such as merging with a well-established firm
- How demand for ESG investments is shifting amid political and regulatory headwinds and the importance of authenticity for mission-driven investors
- A lightning round on the important issues in the industry today, including strategies for uncertain markets, the future of crypto, cybersecurity, and diversity and inclusion in the investment managee industry
In addition to the year-end discussion, Burkhart and Mook also shared an exciting update for the Global Investment Leaders podcast in the year ahead: In 2023, Mook will be joining Burkhart as a podcast host, featuring a bi-monthly interview with industry leaders about how they solved common challenges faced by many of their peers. Mook’s How They Did It sub-series of the Global Investment Leaders podcast will feature industry insiders’ perspectives and is set to premiere in January.
All episodes of the Global Investment Leaders podcast are available on Apple Podcasts, Spotify, Google Podcasts and more. Receive the episodes as soon as they premiere by subscribing today.
November 10, 2022
On this episode of the Global Investment Leaders podcast, Rosemont CEO Chas Burkhart is joined by Dave Fulton, Chairman and CEO of Clearstead, a Cleveland-based institutional and private client advisory firm that has been constructing globally diversified portfolios for individuals, families, foundations and endowments since 1987. Known for its in-depth investment research and personalized wealth management, the firm advises on approximately $32 billion in assets.*
Throughout their conversation, Fulton, who became Clearstead’s CEO in 2013, discussed the choices Clearstead faced around equity succession as the firm’s founder stepped down and new generations of talent sought to build the future of the firm in a scalable, sustainable way. Seeking an outside partner to provide not only capital but also guidance, Clearstead turned to Rosemont. Recounting the challenges they navigated together, Burkhart and Fulton discussed:
• The transformation from Hartland & Co., an institutional investment consultant, to Clearstead, a full-service wealth and institutional advisory firm
• The growth-supporting enhancements the firm made during the pandemic, from investing in the research and operations teams to developing the firm’s alternatives (private) investment platform to expanding opportunities for employee ownership
• Clearstead’s employee ownership culture and how, after Rosemont’s investment in 2017 followed by an investment by Flexpoint Ford in early 2022, employee ownership continues to be in high demand
• The success of the outsourced chief investment officer (OCIO) service offering of the business and the types of endowments and foundations Clearstead serves
• The key business pillars by which Clearstead operates, and the willingness to invest in people, processes and technologies
When speaking about the firm’s continued success of its employee ownership culture and its trajectory for the future, Fulton shares, “You have to keep growing, and you have to have a way for people to keep buying in at below-market rates.”
All episodes of the Global Investment Leaders podcast are available on Apple Podcasts, Spotify, Google Podcasts and more. Receive the episodes as soon as they premiere by subscribing today.
* Approximate assets under advisement (AUA) of Clearstead as of 12/31/2021
This podcast should not be considered as an endorsement of Clearstead Advisors or Rosemont or the services that they provide. Neither Clearstead nor Rosemont were paid for the comments in this podcast. Rosemont had a minority equity ownership in Clearstead, which ended prior to this recording.
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