Wealth manager Stanhope Capital looks after some $7.5bn of its clients’ investments. The manager was originally set up as a family office by a group of rich European families, but its clients are now a mix of other family groups, charities, institutions, and ultra high net worth investors; the minimum entry level is £10m. Stanhope’s allocation to real estate varies with clients’ circumstances, but is generally between 5% and 8%. Before the financial crisis, this was invested mostly in quoted property, through a few funds. “We are focused on independent funds,” says Julien Sevaux, Stanhope’s managing director. “Some property funds linked to banks haven’t been the best performers.
“We came out of quoted property at the start of 2007, when we started seeing some of the problems in Spain and the US. We started reinvesting in private equity property funds in 2008, thinking there would be a lot of distress.” Stanhope looked for managers who came with what Sevaux terms a “fairly clean bill of health”. He adds: “We want people who are experienced, are not encumbered by legacy portfolios and have proved they can add value – where that is not purely based on leverage, but based on operating and management skills.”
Stanhope did back one first-time fund, but it had a fairly experienced manager who had been running a fund and a REIT. “The second fund had previous funds, but had stopped and returned money to investors in 2007 because they didn’t find opportunities. They were people who had proved they had understood the cycles and were able to get out when it was time,” Sevaux says.
“They found good opportunities in 2009- 10 and are continuing to do so, mostly in Europe for the moment. We have been looking for exposure to the US, but there are all sorts of constraints for private investors – managers don’t always make it easy for Europeans to invest in US property. “The other area we are looking at is providing lending to property developers; we are fairly opportunistic,” he adds. Stanhope does not have an in-house property specialist. “We don’t feel particularly handicapped in terms of our ability to assess managers and their skills,” says Sevaux. “If we did have somebody in house, we’d feel an obligation to allocate capital to property.”