Tuesday, 11 August 2020

Review of Hall Capital Partners

Review of Hall Capital Partners
29 Jul
11:39

Updated on Wednesday, July 29, 2020

Ultrawealthy families, endowments, foundations and others can turn to Hall Capital Partners, LLC for help managing their investment portfolios and vast wealth. Hall Capital Partners is a registered investment advisor with a team of 160 employees across its San Francisco headquarters and additional office in New York City.

Together, the team oversees more than $41 billion in assets under management (AUM). Hall Capital places particular emphasis on building a diverse team, and it also incorporates environmental, social and governance (ESG) factors and sustainability issues into its investment process.

All information included in this profile is accurate as of July 29, 2020. For more information, please consult Hall Capital Partners’ website.

Assets under management: $41,599,805,285
Minimum investment: Clients generally invest over $100 million, though no minimum exists
Fee structure: A percentage of AUM; fixed fees; performance-based fees
Headquarters: One Maritime Plaza
6th Floor
San Francisco, CA 94111
hallcapital.com
(415) 288-0544

Overview of Hall Capital Partners

Kathryn Hall founded her eponymous firm in 1994, initially to manage investments for a few family offices and their foundations. Just five years earlier, she had launched a risk arbitrage investment partnership, and prior to that, she worked in investment roles at HFS Management Partners and Morgan Stanley, among others. She has held high profile roles on the boards of various organizations, including the Andrew W. Mellon Foundation, the San Francisco Museum of Modern Art and Princeton University, including the university’s investment company.

Today, Hall serves as co-chair of the firm, which has grown to employ 160 workers. A 21-person research group is responsible for identifying, researching and monitoring thousands of third-party investment managers. Hall Capital Partners is majority owned by the firm’s partners.

Hall Capital serves a small number of deep-pocketed families and institutions. About 115 of its clients are high net worth individuals and families, which the SEC defines as those with at least $750,000 in assets under management or a net worth of more than $1.5 million. Rounding out the firm’s client list are institutions, such as endowments, foundations, charities, pooled investment vehicles, pension and profit-sharing plans and other investment advisors.

No across-the-board minimum investment requirement exists, but most clients who want a custom portfolio invest at least $100 million in assets. The annual advisory charge is typically a minimum of $400,000 (or $300,000 on accounts with a performance-based fee), making the firm suitable only for uber-wealthy investors. The firm also offers pooled investment vehicles that may require minimum investments of $1 million to $3 million.

Additionally, most of the firm’s clients are accredited investors and qualified purchasers, labels typically given to sophisticated investors who meet certain income or asset thresholds and can invest in unregistered investment products, such as private equity and hedge funds.

Services offered by Hall Capital Partners

Hall Capital Partners offers custom portfolios for clients that span multiple asset classes and countries. Clients can choose to have a Hall Capital Partners portfolio manager take control of the daily decision-making for the account, which is a discretionary arrangement, or clients can opt for a non-discretionary relationship that leaves the client responsible for approving each trade.

In addition to investment management, clients can tap the team’s expertise for multi-generational wealth planning in general, addressing topics such as philanthropy, family governance and wealth transfer. The team also offers portfolio accounting and reporting.

Alongside the aforementioned investor services, Hall Capital manages more than 60 pooled investment vehicles that invest primarily in private funds. The team believes these vehicles give clients access to broader diversification than they’d be able to access on their own. Some clients in those funds are advisory clients of the firm; others are not.

Here is a complete list of services offered to families by Hall Capital Partners:

  • Investment advisory services (separately managed; discretionary or non-discretionary)
  • Financial planning
    • Intergenerational wealth planning
    • Wealth transfer
    • Philanthropic planning
    • Business planning
    • Stock compensation planning
    • Tax planning and management
    • Risk management
  • Client service and reporting
  • Management of pooled investment vehicles

How Hall Capital Partners invests your money

Clients of Hall Capital Partners can expect to first set their investment goals and objectives, such as a policy statement, with their advisor or team. After asset allocation strategies are agreed upon, the advisor will construct an appropriate investment portfolio. The bulk of client portfolios are typically customized global multi-asset class portfolios, which the firm builds depending on a client’s needs.

Client funds are generally invested in a wide variety of underlying managers, such as managers of private funds, separate accounts and some mutual funds. Clients also have the option to invest in pooled vehicles managed by Hall Capital or its affiliates that offer commingled investment strategies, as well as in specialized mandates that offer exposure to a specific asset class, such as private equity. Portfolios typically include a global mix of fixed income, equities, alternative assets (like hedge funds), private equity and real assets (such as timber or real estate).

A 21-person research team is responsible for identifying and conducting due diligence on thousands of underlying investment managers. The firm strongly favors managers who use fundamental analysis, meaning they work to calculate a true value for an investment based on company-specific and industry factors like macroeconomic conditions, industry trends, financial statements and competition. The team also incorporates factors like social issues, sustainability of business models and environmental issues into their decision-making process, as the leaders believe that a deep understanding of these issues can drive long-term performance. All managers must be approved by founder Kathryn Hall and the two co-chief investment officers before clients can invest in them.

Hall Capital does not have a trading desk, and thus does not recommend individual publicly traded stocks.

Fees Hall Capital Partners charges for its services

Hall Capital Partners charges an annual fee calculated as a percentage of assets under management. The firm’s fee schedule is tiered, meaning the more money a client invests, the lower their rate.

Clients can choose between paying a higher annual percentage rate or a lower annual rate coupled with a performance-based fee, where the advisory firm takes a slice of the investment gains, say, 10% or so, when the portfolio outperforms a certain benchmark.

Here are the firm’s standard fee schedules, although Hall Capital Partners notes that it has negotiated lower fee schedules with certain clients.

Advisory Fee Option 1: Base Fee Only*
Assets Under Management Annual Rate
First $500 million 0.35%
Next $500 million 0.25%
All assets above $1 billion 0.20%
*Minimum fee of $400,000 per year.
Advisory Fee Option 2: Base Fee plus Performance-Based Fee*
Assets Under Management Annual Rate
First $500 million 0.25%, plus a performance fee of 10%**
Next $500 million 0.15%, plus a performance fee of 10%
All assets above $1 billion 0.10%, plus a performance fee of 10%
*Minimum fee of $300,000 per year.
**Returns must meet certain benchmarks before the performance fee applies.

On top of these advisory fees, clients will owe fees for underlying fund managers, separate accounts, exchange-traded funds (ETFs) and mutual funds. Underlying managers may charge management fees as high as 3%, as well as a percentage of earnings. Clients are also responsible for transaction costs, including brokerage and custodian fee. The firm does not offer wrap accounts in which transaction costs are included in one bundled fee.

Non-advisory clients who invest in the firm’s pooled vehicles that charge management fees generally pay up to 1.25%, plus perhaps a percentage of returns. Clients are generally not charged an advisory fee in addition to the pooled vehicle management fee.

Hall Capital Partners’ highlights

  • Customized advice and management: At Hall Capital Partners, a portfolio manager will be dedicated to sorting through all of a client’s requests and building a portfolio specifically suited to their needs. The firm does not take a one-size-fits-all approach.
  • No commissions or referral income: Advisors at this independent firm do not receive commissions for selling certain investments, which means their compensation is not based on any one investment recommendation. What’s more, the firm does not pay others for referrals, or earn money off of referring clients to other groups. Hall Capital Partners is compensated exclusively from client fees, which eliminates many potential conflicts of interest.
  • Incorporation of ESG factors: Hall Capital Partners’ team factors in environmental, social, governance and sustainability factors when building client portfolios. The firm believes that incorporating these themes into its process provides better insight into the opportunities and risks.
  • A focus on team diversity: The firm’s leaders believe that diverse teams lead to greater diversity of thought, better decision making and superior client outcomes. Thus, the firm partners with 15 organizations to help build and retain a non-homogenous team. The firm’s idea of diversity includes factors like ethnicity, gender, socio-economic background, educational background and more.
  • Clean disciplinary record: Hall Capital Partners reports no material disciplinary or legal events against the firm or its employees over the last 10 years. See more information below.

Hall Capital Partners’ downsides

  • Limited to the uber-wealthy: Hall Capital Partners typically works with families with at least $100 million to invest. Additionally, the firm has minimum annual fee requirements that stretch into the hundreds of thousands of dollars, putting the firm’s services out of reach for most investors.
  • Multiple layers of fees: Clients pay Hall Capital Partners an advisory fee, and then may owe another management fee for the underlying funds in their portfolio. This layering of fees means clients can end up paying more than if they invested directly into the underlying fund. (Clients who invest in a Hall Capital Partners pooled investment vehicle will not pay the advisory fee or the pooled investment fee, although they will pay for the underlying investments in that pooled vehicle.)
  • Incentive to take additional risk due to performance-based fees: Some of Hall Capital Partners’ clients pay performance-based fees, which can range up to 10% of returns. These fees can create an incentive for advisors to recommend riskier or more speculative investments than they otherwise would in an effort to earn this additional compensation. Additionally, the fees could prompt advisors to offer the most promising investment opportunities to clients paying performance-based fees.
  • Inadvertent concentration in investment opportunities: Although the firm believes in broad diversification through multiple asset classes, some underlying funds or separate accounts could end up with overlapping strategies where a client holds one very large position or similar investments. Thus, one bad investment could wreak havoc on a client’s performance.

Hall Capital Partners disciplinary disclosures

Hall Capital Partners has no disclosures over the last 10 years, and thus has a clean disciplinary record. All registered investment advisors are required by the SEC to disclose on their Form ADV any civil, criminal or regulatory actions against the firm, its employees or its affiliates that clients would deem material when evaluating the firm or the integrity of the management team.

Hall Capital Partners onboarding process

Potential clients can contact Hall Capital Partners directly at their New York or San Francisco offices, or they can email the firm through the contact page on its website.

Once a formal relationship is established in writing, clients can expect to have quarterly meetings, phone calls or other communication where they discuss their portfolios, performance and recommended changes. Communication can also occur in between these quarterly meetings. Clients can expect to receive detailed written reports and statements on a quarterly basis as well.

Is Hall Capital Partners right for you?

Individuals and families with more than $100 million to invest can consider Hall Capital Partners. These families may find attractive the host of services offered in addition to portfolio management, such as advice on education planning, stock compensation, wealth transfer and family governance issues, as well as accounting and reporting on complicated funds. Clients may also like the firm’s emphasis on employee diversity, as well as its consideration of certain environmental, social and governance issues.

Investors without such deep pockets, however, will need to look elsewhere. Fortunately, plenty of other registered investment advisors exist to serve clients without $1 million or more to invest. Whenever you’re looking for a financial advisor, it’s always a good idea to research and interview two or three different candidates, taking notes on the exact services they offer as well as how they are compensated. The variance can be wide, so it’s important to take the time to find the right fit for your financial situation.

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Source: https://www.magnifymoney.com/blog/investing/hall-capital-partners-review-ria/

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