Roy Keenan from Yarra Capital Management shares insights with James Dunn from The Inside Network on the role of active management. The Inside Adviser
After the Hayne Royal Commission many advisers decided to steer away from large dealer groups in favour of becoming self-licensed. In the last six months, however, that trend has taken an abrupt turn.
Partners Private co-founder takes private equity path to portfolio management
Advice firms all claim to have an edge, a product or service offering that sets them apart from the pack. For Matthew Cassidy, a founding partner and managing director of the Melbourne-based Partners Wealth Group, the focus on private equity investment gives that claim a certain validity.
Partners Private, 100 per cent owned by Partners Wealth Group, allows high net wealth investors to access assets that are normally the preserve of the top end of town. A prime example are Melbourne and Launceston airports, where Partners Private raised $120 million over two tranches and across 450 clients in 2023 for the Wholesale Airports Access Fund to acquire a one per cent stake in the Australia Pacific Airports Corporation (APAC), the holding company of these two airports.
For these 450 investors, the target returns for these infrastructure assets is 8.5 per cent to 9.5 per cent a year. It’s the historical returns, however, that are putting a smile on investor faces, with an annual 19.2 per cent return in the seven-year period up to COVID, and 10.2 per cent in the seven-year period through COVID.
An asset such as these two airports perfectly reflects Cassidy’s investment approach – look for value while remaining cognizant of growth. In this instance it’s an attractive, secure yield and airport traffic that can only grow.
“Some of the best investment opportunities such as airports have typically gone to the very wealthy or institutions,” he tells The Inside Adviser. “They’re the ones who can write the cheques for these amounts – not your average investor. So, we took it upon ourselves to level the playing field, to give these investors access to these blue-chip private equity investments.”
The first private equity project, a townhouse development, was in 2013, with investors getting a 20 per cent annual return on their investment over two years. Since then, there have been about 40 projects. Although many have property as the underlying asset, Partners Private has also ventured into the equity space, with one example being Acorn Capital, a venture capital specialist that focuses on small cap unlisted companies that mostly exit via an ASX listing.
Over the years the client list has grown, buoyed by the returns these investments have delivered.
“Today we would have about 1,000 clients on our database. We’re also working with three to four other wealth groups to provide their clients with access to these investments – a sub-leasing arrangement that allows us to look at bigger projects,” he says. “We’ve only had one investment that didn’t reach its target IRR (internal rate of return). But those clients ended up with a 13 per cent return versus 15 per cent. So, no one lost any sleep.”
Achieving these results require a major investment in research, as Cassidy explains. “Headed by our CIO Graeme Bibby, we have a team of nine who undertake a rigorous screening process to sort the wheat from the chaff. I guess we’re get about 1,000 proposals a year across our desk, we seriously look at about 100, and proceed with 10 to 15. Tops. It’s not uncommon to spend months looking at a proposal and still give it the thumbs down.”
That Cassidy has taken Partners down this path is not surprising. After graduating from Perth’s Murdoch University with a Bachelor of Commerce, he initially worked with EY and ANZ in his hometown before venturing overseas in the late 1990s to join NatWest Financial Markets in the London and New York offices.
Despite the buzz such work generates, it was financial planning that got his attention, his background in accounting and tax proving the intellectual bedrock on which he built the business with two other founding partners after opting to settle in Melbourne. For Cassidy, it’s not about client investment returns. It’s about the positive impact you can have on clients’ lives – that’s the real driver. As he puts it, “seizing the opportunity to really change people’s lives”.
Just how rewarding became apparent in the wake of the GFC. The market sell-off prompted buying opportunities for clients that Partners seized.
“Australian banks were incredibly secure, and we thought provided an excellent buying opportunity. Macquarie Bank was another example,” he recalls. “I’m not suggesting we have a crystal ball. But there are market signals that dictate, in my opinion, whether you should be underweight or overweight in a particular asset class. Before the GFC, listed property trusts were trading at values far more than their historical average, so we were sellers. It was the same pre-COVID. No one could predict the pandemic. What you could see was that the S&P500 was about 30 per cent higher than its long-term valuation. That’s simply not sustainable and, again, we were sellers.”
Both crises reinforced in Cassidy the need to be active in the markets. “As an adviser, you can’t be flipping lazy. It’s your clients’ money that’s on the line and, at times like the GFC, you must have considered answers. They might not necessarily be right. But they must be considered. This way you build the client’s respect – and trust. The lackadaisical approach that says, ‘she’ll be right mate’, is just not an option.”
