Insights
Cross sector private investment opportunities for family office clients
Being sector non-specific is our focus – there’s a strong commonality across all our deals – Richard Hill
Many private investment opportunities come to wealthy families via private equity firms focused on a single sector. But, according to Head of Stonehage Fleming’s Private Markets Advisory, Richard Hill, that is not an approach that necessarily suits the family office clients we support.
On the question of whether wealthy clients should only invest in the sectors that they understand, Richard is clear. “I think any sector knowledge can be helpful, but I don't think it's a prerequisite,” he says. “We always welcome investors with any sort of industry knowledge. For a start, it helps if they are passionate about the opportunity and real-life experience can only ever by helpful. But our approach is to apply our learnings across a number of sectors.”
One key benefit of working with his team of generalists, notes Richard, is their ability to pivot their expertise to several sectors. “It is basic risk management. As with all investments, if you're going to be involved in private markets, you need to consider the importance of diversification. Spreading your investments across different sectors is just another way of minimising your overall exposure to individual market events.”
While the team are happy to lead on investments where they have specific sector experience, they also welcome opportunities to co-invest alongside other private markets investors with specific sector expertise. “It allows us to benefit from their industry insights during not only the diligence process but also post-investment.”
Richard is at pains to make the important distinction between being diversified across several sectors and being unfocused. “Regardless of sector, my team is wholly focused on businesses of a certain type and stage. If you look in the growth equity space, we're looking for businesses where we can deploy £10m or dollars for a significant minority stake or more. We're looking for businesses that have got proven commercial and economic business models with profitable unit economics – those that, regardless of central costs, ultimately have a highly profitable product to sell.”
There are two other fundamentals that help Richard and his team to zero in on a strong investment opportunity. “A large overall addressable market is a must that gives us comfort that a product isn’t so niche as to have too small an audience. But having really strong management teams trumps all else. If an opportunity comes across the desk and it can tick all of those boxes, we sit up and take notice.”
Richard is Head of the Private Markets Advisory proposition for the Group, he advises many companies across multiple sectors and has developed a focus on advising and working with founder-led businesses. He has led numerous direct investments, co-investments and corporate advisory transactions in the financial services, software, entertainment, real estate, natural resources, energy transition, and business services sectors on behalf of Stonehage Fleming clients.
Stonehage Fleming Advisory Limited is authorised and regulated by the Financial Conduct Authority (FRN. 194929) and is registered with the Financial Sector Conduct Authority (South Africa) as a Financial Services Provider (FSP No. 52580).
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