Decisive Adopts "Endowment" Mindset In Building Long-Run Returns
Decisive is an example of the kind of EAMs that are an important sector in the Swiss financial services industry. It adopts a particular approach to managing money, blending private market as well as listed equities. It oversees about $6 billion of client money.
A Switzerland-based investment firm is blending private and public market assets which in some ways mimic the “Yale Model” – and volatile times are a robust test of how well it can work.
This news service recently spoke to Loic Bondiguel, partner at the investment office of Decisive Capital Management, a firm that, as separately reported today, has added to its team of specialists.
Decisive has a team of more than 80 specialists, overseeing about $6 billion of assets. It has offices in Zurich and London in addition to its Geneva HQ. It looks after more than 650 ultra-high net worth clients and is an example of the sort of external asset management businesses that are going through big regulatory changes in the Alpine state. About 70 per cent of Decisive’s clients are in Europe, 20 per cent are in the Middle East, and the rest are scattered around other parts of the world.
“Unlike conventional siloed players, we work across the intersection of advisory and investment to meet the challenges of the future and support the next generation. It is this curated investment management that provides our clients with access to off-market opportunities to support their ambitions,” Bondiguel said.
It is no longer enough for investment houses to focus on public markets to generate returns, he said.
“We tailor portfolios by combining public and private market opportunities following a risk-allocation model as opposed to conventional asset allocation benchmarks,” he said.
There are two broad legs: Curated investments in niche private markets (equity, real estate or debt), which provide long-term growth with reduced exposure to market cyclicality, and secondly, a focus on technological innovation.
Decisive follows the “endowment style” adopted most famously by the large university funds of Harvard and Yale, holding significant amounts of relatively illiquid assets to generate long-term returns.
“Decisive's main thesis is to simply invest in innovative tech companies that are changing our everyday economy, bringing about exponential improvements in the way we live our lives and run our businesses,” he said.
“Innovation does not stop even during a downturn, and we continue to seek out the very best companies to invest in. The best companies do not have to over-spend to grow fast and market turmoil has a way of separating the sheep from the goats.”
Bondiguel made the point that Decisive co-invests alongside its clients in every business opportunity that is approved by its investment committee.
One way to play into themes is via convertible debt, he said.
In the first half of 2022, venture debt funding rose 7.5 per cent on a year before, and investment firms such as Blackstone, KKR, Coatue, and Viking Global, have started offering debt deals, particularly to late-stage startups.
Bondiguel noted that startups can avoid lowering their valuations by opting for debt financing instead of raising a down round. However, there is usually a 12 per cent to 20 per cent interest rate on the debt offering. Also, covenants are attached to the debt offerings, requiring the recipient to have approval from the lender before spending large amounts or taking on additional debt.
On the client’s side
Bondiguel thinks his firm is more on the side of clients than is the case with banks.
“We all come from the banking industry and feel that the client must be at the centre of the equation. We all felt that banks were too siloed and thus, not able to offer the best products out there,” he said.
Emphasising their belief that the client must come first, Bondiguel continued: "That is why we have built Decisive. Our strong team and global network of top talents means we’re well-positioned to do that."
The firm is busy: Decisive looks at 60 to 80 opportunities per month and applies a range of investment criteria, then shrinks the amount down to between five to 10 opportunities. When due diligence is done Decisive will arrive at a small number of actual investments once the ideas have been approved by the investment committee.