The Ledger
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Barth: Niche credit yielding double-digits is more attractive than S&P 500
“As much as I'm dismissive of private credit, these longer duration, niche-y credit opportunities continue to grow as part of our portfolio, because from our perspective, even if a lot of it is ordinary income, earning mid to high double-digit returns, because …”
Roth: Alpha in merger and convertible arbitrage no longer exists
“Merge your ARB, convert ARB, that alpha doesn't exist anymore.”
Barth: BBR rarely invests with public or PE-backed asset managers
“That's not to say we not do business with investment firms that are public or investment firms that don't have minority stakes, but it's more the exception than the rule because we're focused on people who are waking up and thinking about their returns and the…”
Barth: Venture capital is a mediocre asset class unless accessing top quartile
“Venture capital is a mediocre asset class. We got to be in the top quartile managers. It is very difficult to be in top quartile venture capital managers, given their limited capacity.”
Barth: BBR does not require position-level reporting or separate accounts
“People ask about what reporting do we want to see? And I always turn the question back around to the manager and say, what do you look at? I want to see what's their dashboard, and that's what I want them to share with us, not what they think some consultant w…”
Roth: Goldman Sachs experiences tension between rep and firm goals
“This is not to pick on Goldman. They are a great firm. We would not be here if it weren't for them, but that firm is where there's tension. Between the goals of the individual rep and the firm's goals.”
Barth: BBR adds capital to underperforming managers while other investors redeem
“All the things you loved about a manager and the strategy and the people and the approach aren't changing and they're underperforming. Most folks pull money. We write checks.”
Barth: BBR avoids asset-gathering managers focused on fee retention
“At the end of the day, managers who are focused on earning a management fee and keeping assets and just not underperforming, you know, your average mutual fund whose job it is, is to never be below three or four Morningstar stars so that the four one K consult…”
Barth: Hedge funds are not an asset class; allocate to underlying strategies
“Our asset allocation approach, we allocate to strategies, not to asset classes, right? Hedge funds aren't an asset class. You know, long short equity is a strategy you either do or don't want to be allocated to.”
Barth: BBR invests almost nothing in standard on-the-run private credit
“We do almost no on the run private credit.”
Roth: Enduring investment firms require founders to accept dilution
“You have to be willing to be diluted. You have to be willing to know that you're not going to be selling at the highest print, but what you are getting is a firm that's going to be around a lot longer than we are.”
Roth: Secondary liquidity relieves anxiety and stress for first-time founders
“Once there's some liquidity off the table, and I think this is probably true for a lot of first-time founders, you relax. I think that our anxiety and stress, while we would say we were fun-loving guys and we didn't bring anybody down in the office, my guess i…”
Barth: BBR Partners decided the firm will never be for sale
“Making the decision that the company would never be for sale, and that how do we think about Super long-term for how the firm be structured, and that was a huge mind shift for us.”
Roth: Striving for excellence requires accepting the friction of manager turnover
“If you're trying for excellence, you can't ever get comfortable that it's just ok. And when it's not, be ready for all the commotion that comes with turnover. You gotta tell the manager. You gotta tell the client that things didn't work out the way that you pl…”
Barth: BBR Partners has never allocated to hedge funds
“I think that's different than certainly most other folks who just say, oh yeah, we're going to allocate to hedge funds. We've never allocated to hedge funds.”
Barth: Core real estate became investable in 2022 after 20 years
“For 20 plus years, core real estate was uninvestable for us. In 22, core real estate became investable for us again, just from a lack of capital.”
Barth: BBR stays passive in US large-cap equities, avoids L/S funds
“We are passive for US large cap equities. We've been passive Since day one, we own significantly fewer long short equity hedge funds, and we don't do any that do US large cap stocks, with the exception of industrial focused firm that is doing some market timin…”
Barth: BBR provides structured lending to bourbon producers amid declining consumption
“There's actually terrible technicals, because liquor consumption's going down, and Brown Forman's talking about volumes dropping, and so there's no capital going into that, and so the ability to be a structured lender to these small producers is incredibly int…”
Barth: BBR Pays Far Below Rack-Rate Fees for Small Long/Short Managers
“Because it's been such an unloved asset class, we don't pay anywhere near rack rate fees. It's smaller managers. For us with families, it's also managers who've been much more focused on tax efficiency, and so our ability to generate really attractive After fe…”
Barth: BBR Targets 50/50 Active-Passive Split in Public Equities
“All else being equal in public equities, we want to be about fifty-fifty passive and active on the long side.”
Barth: Be passive in efficient markets and highly concentrated in inefficient ones
“We take a core satellite approach where you want to be passive, and you particularly want to be passive in the most efficient markets, and you want to be active in niche managers where there's a lot of inefficiencies, and they've got a structure to be concentr…”
Barth: BBR secures fee discounts by providing acceleration capital to emerging managers
“You don't want to just be in the lowest fee managers, but you want to pay as little as possible, and one of the ways we do that is guys and gals who are earlier in their life cycle or smaller in their assets, where our asset base makes a difference, and we can…”
Barth: Allocating across different manager temperaments is a powerful diversification tool
“Temperament and approach is one of the ways to get diversification, and so I'll get a question from a client or prospective client, you know, if a stock's down, do you like managers who buy more, or do you like managers who have stopped losses and cut their lo…”
Barth: BBR demands 3-4 unprovided references before backing managers
“There shouldn't be anyone who's such a secret That I can't find at least three or four third-party unprovided references where we can get very detailed, thoughtful opinions on those managers. If I can't do that, and they can't all be positive, we can't make an…”
Barth: BBR prefers errors of omission over errors of commission
“We think that there are two types of hiring mistakes you can make. One is you can hire a manager you wished you hadn't, or make an investment you wished you hadn't, or not make an investment you wished you had. And I would say we are comfortable with the latte…”
Barth: BBR Allocates 65% to Higher-Risk Assets, Half in Public Equities
“So if you looked at your average high net worth portfolio, you know, 65% equities is probably about right. We're 65% higher risk strategies, but call it only roughly half of that in public equities.”
Roth: BBR Partners manages $32B across roughly 180 families
“And where we are today is we have a 190 people at the firm. In three offices, New York, Chicago, and San Francisco, we manage money exclusively for wealthy families. There are about a 180 families where we're overseeing their wealth, and that's thirty two bill…”
Barth: BBR bought out founding partner Art Black with Lincoln Peak
“Our third founding partner, Art Black, decided he wanted to leave, and to facilitate that, he wanted to be bought out, and so we brought in a third party passive partner, these folks at Lincoln Peak, who are amazing and have been amazing partners for 15 years.”
Barth: BBR has never acquired a firm and has no plans to
“We've never bought anything. That doesn't mean we might not someday do something. We get approached all the time, but it's not part of our plan. It's not something we intend to do.”
Barth: BBR declined a 2x NAV bid on a 2022 venture fund
“We are in a venture capital fund that's a 22 vintage that bought a lot of things in 23 and 24. It's about 60% invested, and we just got a bid for two times NAV. We're not going to take it.”
Barth: BBR invested in industrial outdoor storage before institutional adoption
“Industrial outdoor storage. It's become a little more institutional, but two years ago when we first did it wasn't an asset class that anybody would own.”
Roth: Early revenue pressure makes it hard to reject ill-fitting clients
“It's pretty hard in the beginning to say no to revenue. We made some mistakes along the way there, but once we were comfortable, once we knew we were a company built to last, we could then say, even for clients that wanted to hire us and that would have moved …”
Barth: California carbon credits are one of BBR's top 2021 investments
“We've also made a lot of money on California carbon credits. Actually, year to date, one of our best investments.”
Barth: BBR Partners evaluates more than 2,000 investment managers every year
“We meet over 2000 managers across the spectrum, you know, literally from wireless spectrum to muni bond managers. So our database That's 2000 a year. Thousand A year.”
Barth: BBR Partners averages 15% annual manager turnover
“And so on average, our turnover has been about 15% a year. There's been years it's a little lower, a little higher than The highest number has been kind of low twenties. The lowest number is kind of high single digits, but we look at that data.”
Barth: BBR Partners hires 10 to 20 managers annually
“We're going to hire people You know, 10 to 20 managers a year. That's a pretty small percentage of the folks you meet.”
Barth: BBR requires 7 of 9 committee votes and CCO veto power
“There are nine people total on the committee, and you need seven to vote yes to get an idea approved, and separate of that, our chief compliance officer who oversees operational due diligence, Has a unilateral veto as well.”
Barth: BBR Partners is passive in U.S. large caps and municipal bonds
“U.S. Large cap. You could argue that we're passive in fixed income, where we own, you know, intermediate duration, high quality investment grade bonds, primarily munis again, because we're families.”
Barth: BBR Partners maintains about 50 core public market managers
“We have about 50 public market managers that are core.”
Roth: No employees at BBR Partners receive commission pay
“Nobody at BBR gets paid on commission. Everything's oriented towards team.”