As wealthy families go, the two behind LGL Partners and Forbes Family Trust seem pretty different. Yes, both might owe much of their fortunes to the media industry – the Forbes family to publishing and the Lenfests to cable television – but at first glance they appear to take very different approaches to wealth.
In the red corner is the Forbes family, New Yorkers with a reputation for extravagance. Malcolm Forbes, the son of BC Forbes who founded the eponymous magazine empire in 1917, splashed out on private jets, yachts, hot air balloons and lavish parties. The later generations might not be as frivolous, but the family’s wealth took a bashing in recent years as the publishing business struggled.
Then there is the Philadelphia-based Lenfest family, headed by hardworking entrepreneur Gerry Lenfest (pictured, right). After a difficult slog, he established a successful cable empire, Lenfest Communications, running it for decades before it caught the attention of AT&T in 1999 and Comcast in 2000. When Comcast came calling, the family, which privately owned a majority of the company, received more than $3 billion (€2.3 billion) in Comcast stock. Gerry and his wife, known for their personal frugality, have been on a mission to give away vast chunks of their fortune since.
Yet, despite their seemingly very different approaches to spending, these two families recently teamed up together through the family offices they founded. In January LGL Partners and Forbes Family Trust announced they had formed an “exclusive strategic and investment advisory partnership”, whereby they would share staff and investment expertise.
P Scott Gregorchuk is one of three men charged with making the partnership successful. For years, he had advised the predecessor of LGL Partners – a single family office set up by Brook Lenfest, Gerry’s son, following the sale of Lenfest Communications – before joining the family’s newly established multi family office three years ago. Since January he has also been chief executive of Forbes Family Trust – set up as an MFO in 2009, “right on the heels of the financial crisis”.
Prior to January’s announcement, the two family offices had spent 18 months working together informally, says Gregorchuk. “We wanted to see how the two cultures fitted together. We wanted to walk before we started to run,” he says.
Was it not a strange fit, considering the families’ seemingly different approaches to wealth? Gregorchuk won’t comment on spending habits or otherwise, but he reckons both have a similar approach to wealth management within their family offices – conservative and for the long term. “We had a very successful year-and-a-half working together and decided it was in the interest of both organisations to agree to a longer term relationship, so that both sides could commit the appropriate resources to growing the businesses together and independently,” he adds (Malcom Forbes pictured, left).
Reading between the lines, it almost seems like a merger is around the corner. Gregorchuk’s answer is careful: “It’s too early to really speculate about what might eventually happen or what might make sense structurally with the organisation.” However, he adds the partnership “is open to morph as time develops”.
Since the financial crisis, other family offices have made similar moves – already this year Crossland Private Office became part of wealth management group Bedell Group, claiming this would help increase its reach and effectiveness. Gregorchuk reckons the partnership between FFT and LGL will do something similar, providing “access to unique investment opportunities that either of the organisations may come across, combined buying power to ensure clients are getting access to interesting ideas at appropriate rates, and just intellectual chat between the two groups”.
He dismisses any suggestions that the MFOs struggled to make their mark. “Our origins are from two families who thought about wealth management and how they were doing it, and saw an opportunity to use everything that they had built and the talent that they had amassed to open the doors and have a handful of other clients with similar ambitions join the organisation,” says Gregorchuk. “It’s a great solution for somebody that’s got a reasonable level of wealth and likes the idea of a single family office, but doesn’t want the expense of going out and building it themselves.”
The Forbes and Lenfest families now account for a “minority” of the $1 billion-plus assets under management. “The business has grown significantly; therefore their relative percentage falls as new clients come on board,” says Gregorchuk. However, they remain strong backers, he adds. “They are not involved in the daily operations of the business, nor have operational control and I don’t think they want operational control. But they are happy to help in terms of being an advocate of the independent and objective approach to how to handle your wealth,” says Gregorchuk. Among the most active are Brook Lenfest and Miguel Forbes.
The daily management has been left in the hands of Gregorchuk, chief investment officer William Luterman, who has worked for the Lenfests since 2000, and FFT co-founder and president Keith Bloomfield. Since January, all operations and investment teams report to the three men – whose backgrounds range from wealth management to investment banking and law. “We all have deep experience in various aspects of the family office and wealth management business, but we come at it from a different perspective,” says Gregorchuk. Ex-Goldman Sachs banker Luterman, for example, set up LGL “from an investment perspective”, while Bloomfield, a lawyer, has a “unique way of helping” wealthy clients with operating businesses “think strategically about how the companies fit into their overall wealth management picture”, says Gregorchuk.
How has performance been over the last few years? “It’s been good,” Gregorchuk says, although he won’t give exact figures – FFT and LGL combined have about 30 families on their books and each client’s investment strategy is modelled around the family’s “entire financial picture”, so portfolios differ greatly.
“We don’t really discuss performance at the firm level. That being said, with the individual asset classes we’ve had some good success versus relative benchmarks and we spend a lot of time making tactical changes to portfolios throughout the year to be able to reflect valuation changes and various classic classes in the market,” he says. “So, for example, in 2012, we had some tactical overweights to emerging market equities, and at the end of the year some significant underweights to US treasuries.”
Gregorchuk is coy about expansion plans, but it must be useful being able to namedrop the Forbes and Lenfest families when looking for new clients? “The fact that they’re two well-known names is certainly helpful to the business in terms of having dialogue with other families, and it gives families some level of comfort.” But, he adds, the families he deals with are sophisticated.
“The type of family groups that we’re talking to do a lot of due diligence, kick the tyres quite a bit to identify what’s a good solution for them. And we encourage them to do so, as we think everybody should really get their handles on wealth management, on how family offices operate, what their capabilities are.” So, he adds, “it opens doors”, but at the end of the day, wealthy people want to know the family offices do a good job.
Anyway, it seems FFT and LGL are picky about what families they work with. “If there isn’t a cultural fit, and that same sort of investment philosophy, then I think the message is we would rather not enter into a relationship that could present with some friction,” he says. LGL and FFT focus on the “preservation of capital and always preparing for challenging market environments, and then growing assets at a reasonable rate” – most of their clients, he says, have created a lot of wealth and don’t want to put it at risk. So a family that is heavily involved in day trading would probably not be a “good fit”.
For this MFO partnership, it’s not just money that talks. “Just because somebody has a lot of money doesn’t mean that it’s a good fit for our organisation,” says Gregorchuk.
Probably the Forbes family member most associated with FFT, Miguel Forbes (pictured, right) is the grandson of Malcolm Forbes and son of Robert, children’s author and current vice-president of the family firm. Since joining Forbes Media in 1996, Miguel has worked his way up the family business and is now president of worldwide development.
As well as working in the media business, the 41-year-old has co-founded a number of ventures, including renewable energy company Planetary Power, and has been heavily involved in pushing the Forbes brand into other areas – hence the setting up of FFT. “Becoming an MFO was a key strategic move towards leveraging networks, investment insights and capital to access the best possible investment opportunities. MFOs are positioned to provide superior service and maximise efficiency,” he told CampdenFO.
A man who likes partnerships, Miguel played a crucial role in developing a relationship between Forbes and Fox cable television in the early 2000s, which resulted in the launch of popular business show Forbes on Fox. Now as FFT chairman, he will also play a role in the success of the new FFT/LGL set-up. Gregorchuk says: “He wants to be involved in the future development of what we are doing.”
Brook Lenfest (pictured, left), founding partner of LGL Partners, seems to have inherited his father’s entrepreneurial spirit. Following Comcast’s acquisition of Lenfest Communications, he inherited $500 million in Comcast stock. Instead of sitting back and relaxing, he bought a stake in communications service provider NetCarrier, running it for a number of years before becoming chairman. He is also an active real estate investor and, like his father, a well-known philanthropist, establishing the Brook J Lenfest Foundation in 2000.
The 44-year-old was also the driving force behind setting up the predecessor of LGL Partners. “After the liquidity event, rather than pick one or two investment banks to help him navigate everything that was out there financially, he decided he would take somebody from one of those banks, bring them in-house and then that person was responsible for navigating all of Wall Street,” says Gregorchuk. That person was Bill Luterman.
Brook has been a big supporter of the Forbes/Lenfest partnership, realising that family names add to the allure. “The Forbes and Lenfest names represent values based on integrity and trust,” he told CampdenFO. “Joining forces to provide a superior MFO made too much sense to pass up.”