Wealth manager LGT chairman sees opportunity in stock crash to find value
Prince Max von und zu Liechtenstein, chairman of the world’s biggest private wealth manager LGT, sees value in the market crash and points to the importance of impact investing.
When a group of UBS fundies took their business private five years ago they couldn’t have predicted they’d not only grow funds under management by $10bn but sell it to one of the world’s richest royal families for $475m.
Now – just a month after the ink has dried on its deal to buy Crestone Wealth Management – LGT Group chairman Prince Max von und zu Liechtenstein is in Australia to meet some of his new firm’s high net worth clients.
Instead of seeing the wipeout of stocks abroad and in Australia as a negative, Prince Max said it has created opportunities to invest at more reasonable prices, particularly in the tech space.
“The public markets have corrected in a very significant way and this is probably a point in time, when you can look at actually some of the sectors that are viewed as super unfavourable,” Prince Max told The Australian.
“I do think that there are technology businesses out there that from a longer term perspective, have great prospects and they are completely hammered now, and so you could pick them up for very good prices.”
In something of a reversal of the norm for a firm that has specialised over its 90-year history in private equity, the Prince said private equity valuations will also now likely need to ease with the public markets to find good value.
Crestone was already involved with private equity before the takeover LGT and the managing partner in Australia, Michael Chisholm, says that he expects this figure to grow.
Mr Chisholm said when his team left UBS through a management buyout, private equity accounted for 2 per cent of its portfolio. This figure has now risen to 17 per cent and should increase to about 25 per cent though the takeover.
“I think we will be able to get some unique opportunities in the private equity space,” Mr Chisholm said.
“We’ve already got some terrific relationships around the world in the private equity and venture capital space”.
Key relationships include Square Peg and Blackbird, he said.
“Those VC firms are regarded as market leading and we are seeing that our clients are significant investors in each of those,” Mr Chisholm said.
One of the benefits of private equity is that it has historically had higher returns, added Prince Max, but he said investors need to understand that this type of investment is for investors who don’t require quick liquidity.
“The stock market is a wealth transfer machine, from the impatient to the patient,” Prince Max said, quoting Warren Buffett.
“A lot of people out there are incredibly bad at picking the market and always get it wrong.
“We really believe in investing in quality companies, be it private, be it public with a long term perspective. Investment strategies that bet on getting the timing right have not shown great track records.”
Crestone had built its funds under management from $14bn when it spun out of UBS to $25bn at latest count. Prince Max said he expects the newly named LGT Crestone could easily grow its funds under management by at least $10bn in the next five years.
LGT Group – originally the Liechtenstein Global Trust – is the largest family owned wealth manager in the world, with an estimated US$396bn ($571bn) in funds under management.
The family is considered Europe’s wealthiest royalty, worth an estimated fortune of US$7bn, built up through its extensive land holdings and LGT, which is considered a private bank in Europe.
Prince Max says that being a royal comes with responsibilities to try and improve the world and that his firm always considers risk, return and impact.
“Absolutely, I have a strong conviction about that. Given the challenges that we are facing, every business and every person has a responsibility to try to contribute because I think the urgency is relatively high, and we’re going to make progress.”
Mr Chisholm had previously said the conversation with LGT about acquisition started with a discussion over the two companies common use of the Avaloq wealth management platform. The deal to buy Crestone will see an initial upfront payment of $250m, plus a $225m earn out payment over five years.
However, the earn out is dependent on forecasts, with a potential escalation bonus if Crestone tops its targets or cut to the payment if the wealth manager falls short.
While Crestone didn’t disclose the price proposed by LGT against its own internal valuations, the price paid is understood to represent a premium.
Crestone boasts 250 employees, including 92 investment advisers, across sites in Melbourne, Brisbane, Sydney, and its six-month old office in Adelaide.
The deal to purchase Crestone by LGT comes after a year of conversations between the two, kicked off by the initial approach from the Lichtenstein headquartered wealth giant.
LGT employs over 3,900 people who work out of more than 20 locations in Europe, Asia, the Americas and the Middle East.
“That level of stability and consistency is so important and aligned very neatly with our philosophy of looking after clients in the long term,” Mr Chisholm said at the time the deal was announced in December.
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