SPHERE – Interview with Marc-Phillipe Davies, Managing Partner, Key Family Partners
By Elsa Floret, SPHERE, December 2021
Founded by Hugues d’Annoux and Morten H. Kielland, Key Family Partners is designed as a private investment club, which offers wealthy families a professional structure offering solutions in asset allocation, investment, reporting and administrative services. Key Family Partners offers its clients advisory or discretionary management mandates. Key Family Partners started in 2019 with its two co-founding families. Today it has four. Several others are interested and are co-investing with Key Family Partners whose objective is to create a partnership of 10 families.
Key Family Partners, created in Geneva in October 2020 presents itself as a new generation independent multi-family office. What is your business model?
Marc-Phillipe Davies : There are two essential differences. First, families who join KFP have the opportunity to become shareholders in the company. This ensures that we are working in their best interest, treating them as partners rather than customers. Second, our investment philosophy is very different from that of the wealth management industry. We follow principles that set us apart from the crowd.
How is your investment philosophy different?
It is proven that asset allocation is the main driver of performance, so it must be mastered. In addition, traditional markets are increasingly correlated. As a result, our clients’ current allocation to alternative investments is well above the industry norm of around 50%.
Participating families by becoming shareholders are thus directly interested in the success of their multi-family office. How many families does this represent?
We started in 2019 with our two co-founding families. Today we have four. Several others are interested and are co-investing with us before considering a full equity partnership.
Do you set yourself a limit in terms of the number of shareholder families?
Yes. Indeed, a partnership means more than a simple equity participation. Families should receive the same level of service that they are entitled to expect from a family office, of which they would be the only participants. They also share their private investment flow with other families. That’s why, when we started, our goal was to create a partnership of 10 families, in order to remain agile and focus on the needs of families. In other words, staying true to the DNA of the family office.
Each of the families with their own networks can bring investment ideas that the others did not know about and which are carried out jointly. How does this actually happen?
We have regular meetings to review and discuss all investment ideas that come to us. Due diligence can be done in-house or outsourced. We advise and families decide for themselves if they want to invest. In the end, what matters most are the relationships and the people behind the transactions. Last year, we traded two stakes in tech “unicorns” for less than the round, based solely on the strength of the relationships we have. We are planning releases in both cases this year.
In addition to the traditional activities of a family office, Key Family Partners’ approach is based on the Yale model, which favors alternative and illiquid investments, such as private equity, real estate and hedge funds. What are your investments in the alternative?
In private equity, we focused on growth strategies with good exit-level visibility. Our hedge funds cover long/short equity, event-driven, long/short credit and systematic strategies. In real estate, we favor value-added projects, where we can create additional value from the initial investment. For us, alternative investments are not just for diversification. We seek significant returns on a case-by-case basis, regardless of the economic context.
In terms of performance, what objectives have you set for traditional management and alternative management?
To date, the outlook for returns on traditional assets seems very low to us, for example, 3-6% per year over the next 10 years for US equities. For hedge funds, we are aiming for 7-15%. In private equity, we evaluate transactions on a case-by-case basis and expect returns of 15% and above. We do not follow benchmarks. In my view, the investment objective of any true family office is to generate real returns, that is, returns that exceed cash and inflation, with as little risk as possible.
Original article: https://sphere.swiss/lallocation-actuelle-de-nos-clients-dans-lalternatif-est-de-lordre-de-50/
