Next-generation private investment office Eighteen48 builds on decades of experience to serve the needs of professional investors, sophisticated families and institutions
‘The firm’s name is inspired by a year of revolution and change’. So says Julien Sevaux, who co-founded Eighteen48 Partners in 2019 with Tarek AbuZayyad and Edward Clive.
The team were formerly instrumental in the success of Stanhope Capital, which Sevaux co-founded in 2004. Eighteen48 is also a nod to a period in which the family businesses of several of the firm’s founding clients were established – and a reminder of the importance of taking a long-term view when it comes to investing. The ‘year of revolutions’ proved to be an outstanding time to invest. ‘Many of our clients have investment horizons measured in decades’, Sevaux tells Spear’s. ‘They have the capacity to benefit from the only absolute advantage an investor has in today’s markets: time.’
Accordingly, he warns that ‘the pervasive short-termism of the asset management industry means that many are not making full use of this advantage.’
Eighteen48’s team has attracted an impressive roster of clients, who range from sophisticated industrial families to private equity professionals. They recognise Eighteen48 as ‘a research-led firm’ which has been ‘created by investors for investors’.
Sevaux describes the venture as a potent combination of ‘a dynamic array’ of minds, disciplines, and specialist asset class and geographic expertise. The founders and most of the senior employees, clients and strategic partners – such as John Singer, former managing partner of Advent International – are also shareholders. ‘A real difference is that we invest our own capital significantly alongside our clients,’ says Sevaux, who emphasises the co-operative nature of Eighteen48. ‘Everyone is eating the same cooking, which creates a very powerful alignment of interests.’
Culture is key, and the team has spent considerable time developing an environment in which talent and endeavour are rewarded – and where the client comes first. ‘Intellectual curiosity and collaboration are valued over ego’, says Clive. Equity is granted on the basis of contribution to the business as a whole.
The investment office has a rapidly growing AuM, from a solid $600 million at launch. Clive, who oversees investment strategy in his capacity as CIO, notes that the firm is the ‘next generation of wealth manager, which does much more than simply build diversified portfolios of third party funds – often too diversified’. Sevaux agrees: ‘Twelve to 15 equity funds is too many,’ he cautions. ‘You’re paying active management fees but only getting the index performance, and nothing moves the needle.’
The founders have built a 16-strong team which includes direct investment teams working alongside fund selection specialists, with expertise across traditional and alternative strategies. The result? Higher conviction manager selection, and a virtuous circle which leverages both public and private market insights in the firm’s direct investment activities.
‘By conducting primary research on public firms, we gain valuable insights into the private universe of companies, and vice versa,’ says Sevaux.
‘Our focus on the micro also gives us staying power.’ Often traditional managers are confounded by a focus on volatility mitigation and the temptation to time markets – generally unsuccessfully – based on short-term macro or technical factors. ‘If you know what you own, you can have the conviction to hold it or even add to it when times are challenging, allowing your capital to compound successfully over time,’ says Sevaux. ‘Many people have been overly cautious for a very long time, and that has cost them a lot of money.’
This long-term outlook and high conviction stance – powered by inhouse research – gives the firm’s direct equity team a focus which is now rare in the industry. ‘It’s a low-turnover, focused approach,’ says Sevaux. ‘There is a limited stock globally of excellent businesses with a growth tailwind and strong competitive positioning. These generate sustainably high returns on equity, which they can reinvest into their businesses and compound their intrinsic value over time.’
Once the team has identified these champions, they judge when they are available at a ‘fair’ price and then hold them – if the quality persists – ‘ideally for ever’.
For direct private investments the key, notes Sevaux, is to have a funnel of opportunities from which to filter out the two or three businesses per year that that are genuinely attractive. ‘We are fortunate to receive a regular flow of high quality co-investment ideas from our clients and senior advisors, as well as our wider network of experienced family offices and private equity professionals,’ says Sevaux. ‘Patient capital such as ours is highly attractive to these investors.’
Is it still the right time to invest in private markets? Clive says discipline is vital: ‘The investors who do well are those who commit a regular quantity of capital to this area every year. That capital is deployed for up to five years into the future, which means that today’s market environment can have little bearing on the opportunity set when capital is actually put to work.’
Eighteen48 has the relationships necessary to pry open highly successful funds which are ‘often closed to new investors’.
‘While we continue to allocate capital to some of the top names in the large cap space, there’s also a whole world of opportunity beneath in which the best managers have been able to generate really significant outperformance,’ says Clive. ‘These funds simply can’t accommodate the scale of assets which large banks and consultants need to allocate.’
The team’s expert scrutiny is also applied in impact investing, an area of increasing topicality as clients look to do good sustainably while generating an economic return. With senior advisor Richard Broyd, who sits on the investment committee of the Larry Ellison Foundation, the team is building partnerships with foundations and investors in the space.
‘We provide supportive capital and financial expertise,’ says Sevaux, while partners provide investment opportunities with ‘true impact credentials’. This is of great interest to the next generation, Clive observes.
‘Our next-gen programme is growing, and that’s a great thing. It’s only through engagement that you have real conviction in your investments, which tends to stand you in very good stead for the long run.’
Sevaux says this philosophy is embedded in the blueprint of the firm.
‘We are the “home team” to sophisticated investors who want longevity,’ he says. ‘Eighteen48 is not a business we have set up to be sold, but a partnership created to steward our families’ and our clients’ capital for decades to come.’
Next stop, 2048.