Crossbridge Capital, with offices in London, Singapore and Malta, is on the lookout for expansion opportunities by absorbing firms, continuing its rapid ascent after starting out just three years ago, its CEO says.

Crossbridge Capital, a wealth management firm launched in the teeth of the 2008 financial maelstrom which has since expanded its staff five times over, is on the lookout for potential merger and takeover opportunities, its chief executive told this publication recently.

“The opportunity is to look around and look at other wealth managers, whether they are in London or Singapore and ask how many of them are keen to continue operating as independent entities or would prefer to join up with us,” Tarek Khlat, one of the founders of Crossbridge, said at his offices in London’s Mayfair district. The firm, launched in September 2008, has 120 clients with under $3 billion of client assets.

“They may not have the scale themselves to continue as independent entities. Reaching out to them is our focus. We will continue to hire new teams for the regions. When markets are difficult and margins are squeezed, we want to say to other managers: come and work with us,” Khlat continued, while not disclosing the names of any firms his firm might be interested in.

“We’ve been profitable as an entity from day one,” he said.

A firm that was launched within days of the bankruptcy of Lehman Brothers and that has managed to be profitable ever since has got to be doing something right in an environment of tight margins and escalating regulatory costs. And this business is in expansion mode.

Khlat has plenty of experience. At Credit Suisse, he was managing director and group head for the Middle East at the bank in London. Before that, he was a vice president at JP Morgan Private Bank from 1995 to 2000. And he’s certainly media-savvy: from 1988 to 1993, he worked for several leading media companies including CNN and FOX. His Crossbridge co-founder is Jean-Pierre Aoun, another former Credit Suisse man who represented a large chunk of the Middle East activity in the London office, and like Khlat, he also worked at JP Morgan

Crossbridge’s value proposition – or to switch industry-speak, its unique selling point – is blending traditional wealth advice with helping businesses of a certain size. As many clients in fast-growing emerging markets are still very much engaged with their businesses, this is a niche that Crossbridge is filling, Khlat said.

“We have gone a bit beyond pure wealth management...if you are dealing with entrepreneurs, you need to realise that many of them are still involved with their businesses and as such, want to engage with an advisor to discuss their corporate assets,” he said.

In contrast to some of the top-tier banks and their approach to corporate finance deals, he said that Crossbridge considers deal sizes from $5 million to $150 million, a size he says frequently does not interest large firms. “Banks often just don’t want to do these kind of deals,” says Khlat. “It [corporate advisory, etc.] makes our wealth management relationships with our clients stickier because we’re providing a complementary (and needed) service.”

Spreading eastward

It appears to be a winning approach. Crossbridge now employs 30 people, starting from six people three years ago. The firm opened an office in Singapore earlier this year and has offices in London and Malta, the latter becoming a more visible wealth management hub in recent years.

The need for a presence in Asia is now so self-evident that office openings by firms initially based in the West is no longer surprising. With economic life proving to be tough in many regions, notably Western Europe, the allure of the more vibrant East is irresistible.

“In emerging markets, that is where the entrepreneurs are and where wealth is being created,” said Khlat.

The Asia market, for example, sees a tight fit between corporate finance needs of entrepreneurs and their wealth management requirements. Banks are taking notice: Standard Chartered and Citi, for example, have made moves in this space. Citi has appointed a head to oversee cross-selling between the corporate and wealth management parts of the bank.

Independence

For Crossbridge, there is no danger of clients worrying that their wealth management service is just a conduit for whatever an investment bank can pitch their way. “We have no products to sell here; there are no fund factsheets on show. We are fully independent,” said Khlat.

Independence is a word that comes up frequently in the conversation with Khlat, whose background in working for large institutions gave him a taste to take a more hands-on approach in a smaller, but still significant, business.

He said that the financial strength that comes from having Julius Baer as a minority shareholder in the firm is an important selling point for the firm, which is run on a partnership basis, giving staff a strong sense of ownership over its health.

“When one of us says to a client 'invest in Japan', it is because we believe in it,” he said.

Wealthy of the future

The firm also looks to engage with clients who may not have high liquidity at the moment but who will do so in several years’ time. “We need to get in early,” Khlat said.

Clients who have been given a number of propositions by their banks will come to Crossbridge for advice on these offers, he said. “We make sure banks work harder for our clients.”

Another issue that came up is how a firm such as Crossbridge is trying to engage more with policymakers in the UK and Europe so that there is a more informed debate about what wealth management actually is – and what it is not. Crossbridge is a founder member of the New City Initiative, the UK-based wealth management group. “The financial services community has been lumped into one,” he said.

The economic news is no less unsettling now than it was in September, 2008. However, for a young firm used to turbulent times, there seems no likelihood that Crossbridge will panic.