Stonehage Fleming eyes US and Asia via stake sale

The multi-family office wants to increase the geographical split of its client base.

Stonehage Fleming wants to expand its geographical reach after selling a minority stake to investment trust company Caledonia Investments.

The London-based multi-family office announced in late December it was selling a 36.7 percent equity stake valued at approximately £92 million ($116 million; €102 million) to Caledonia. The sale is structured as a tender offer and is expected to complete by March following shareholder and regulatory approvals.

While Stonehage Fleming is the “number one” family office investor in EMEA by assets under management, the US and Asia are natural places for the business to expand, Duncan Johnson, head of the Unquoted pool at Caledonia, told Private Equity International. Part of the plan is to increase the geographical split of the clients served by the firm, he added.

Stonehage Fleming has been expanding its reach and client offerings in the last year, having partnered in November with private wealth firm Glenmede. Philadelphia-based Glenmede was initially founded to invest the assets of Pew Memorial Trust and oversees $40 billion for almost 2,000 families in the US.

In October Stonehage Fleming teamed up with Luxembourg-headquartered Lombard International Assurance to allow its family office clients to access Lombard’s insurance plans.

Caledonia’s acquisition will “provide the basis for the next stage of Stonehage Fleming’s journey”, according to Guy Hudson, partner and head of marketing at Stonehage Fleming. He characterised the next stage as bringing the firm’s range of services to a larger number of clients in its existing core markets in EMEA, and expanding into geographies where the firm is under-represented.

Stonehage Fleming, which has a joint venture partnership in Asia focused on China, is still at a relatively early stage of development in the region, Hudson added.

Caledonia expects to pay a further £20.6 million, subject to Stonehage Fleming meeting its financial targets in end-March 2020 and 2021, according to the statement. LSE-listed Caledonia has also offered a £30 million term loan facility for Stonehage Fleming as part of the funding of the transaction.

Stonehage Fleming’s management team will remain in the firm following the transaction, while Johnson and Charlie Edwards – members of Caledonia’s Unquoted team – will join the board, Johnson said.

Stonehage Fleming management and staff remain the largest shareholders with approximately 50 percent of share capital.

The global family office services market is expected to grow at about 9 percent per year as families look beyond private banks for investment and wealth planning advice, according to Caledonia.

Across the world’s family offices, private equity is the most favoured alternative asset, with direct investments and fund commitments accounting for 21.6 percent of the average family office’s alternatives portfolio, according to the UBS/Campden Wealth Global Family Office Report 2018.

As a strategic minority investor, Caledonia will provide resources and expertise to accelerate the business’s growth organically and through acquisitions. Johnson described this as a “hands-with approach” – not the private equity hands-on control investing – rather, more of a long-term partnership approach with the management team to keep the business moving.

Caledonia had £2 billion of assets under management as of 30 November and typically invests between £25 million and £100 million in private companies via its Unquoted portfolio.

Stonehage Fleming was formed in 2015 from the merger of Stonehage and Fleming Family Partners. The firm advises on over £45 billion of assets of 250 wealthy families in EMEA, including the Flemings.