Specialist sector blooms as wealth booms

WESTERN suburbs real estate agent Chris Shellabear picked a growing niche to target his listing on Forrest Street, Cottesloe.

“Perfect for the family office,” states his signage outside a rare vacant lot on the exclusive eastern end of the street, a quiet 200-metre stretch of road that is already home to some of Western Australia’s fund managers and private funds.

Among the major local family offices identified by Business News, six of them are headquartered on this short stretch of road, well away from the famous beach that shares the suburb’s name but close to the popular meeting places along Napolean Street’s café strip.

And while Forrest Street is not a newcomer to family offices, having had some of the longer-established operations based there for decades, the cluster has grown in the same way that the overall sector has in recent years.

Talk to any of the old hands in this field and they will agree the number of family offices in WA could be counted with two hands a decade or so ago.

“From memory, I counted six or seven others, maybe eight,” said Hoperidge Capital chief investment officer Jon Biesse, who has worked with Navitas founder Rod Jones and his family for the past decade after leaving investment adviser Argonaut in 2013. “It was a fledgling investment class,” he said.

“I have explained what a family office was hundreds of times in those first few years.”

Growth sector

But the explosion of wealth in WA from resources and technology has multiplied that number in the past decade.

Another factor in this growth is more wealthy families dealing with inter-generational wealth transfer and succession.

On a strict definition of private wealth managed by non-family expertise, there are at least 23 such organisations in WA with an estimated asset base of $200 million or more, equalling $87.2 billion.

Loosen the criteria slightly and allow a second-generation family member controlling a relatively diversified portfolio and the number grows to 27, managing assets worth $96.35 billion.

Defining this group is not an exact science.

With about $30 billion in assets, Hancock Prospecting, chaired by Gina Rinehart and run by Garry Korte, skates a fine line between a major family business and a family office but its efforts in recent years to use its iron ore income streams to diversify its holdings certainly seem to put it in both camps.

A clearer arrangement is that of the Forrest family.

Even the very recent separation of Andrew and Nicola Forrest has not, at this stage, untangled the arrangement where their private commercial interests have been pursued via Tattarang, managed by John Hartman.

Among the family members running what could be viewed as family offices is Ryan Stokes, who is chief executive of Australian Capital Equity, the private investment vehicle established by his father, Kerry, who remains very active and influential in national business and political circles, through his assets, especially his media interests.

The Stokes have a formidable group of executives and advisers at or around the nucleus of ACE, but the family remains very hands on at second-generation level.

Raeside has an estimated $900 million in assets from the sale of the Gull Petroleum business founded by the late Fred Rae.

At Wyllie Group, with an estimated $650 million asset base, Melissa Karlson, daughter of founder Bill Wyllie, took the reins a few years ago from professional management that had run the outfit.

Adam Steinberg heads LAI Group, which his father, Malcolm Steinberg, founded as the holding company for the Timezone arcade games empire.

Timezone is now part of Asian giant The Entertainment and Education Group, with a significant stake owned by the Steinbergs.

That and other leisure-related assets under their direct control puts their estimated asset base at $500 million.

The names above are some of the older fortunes in the family office game, all with significant second-generation involvement.

But Business News has found plenty of more recently made wealth that appears to have established formal family offices, with senior non-family expertise in management, well-staffed offices and, in many cases, a website that provides rudimentary information about their activity.

Emerging players

The biggest of these is Lance East Group, a family office which is barely a year in existence. Established by Laurence Escalante as the private vehicle for the fortune being generated by his online gaming business VGW Holdings, LEO is run by former banker Emilio Pagano.

Another two significant players relate to the establishment of two standalone family offices by the third-generation beneficiaries of the fortune established by Peter Wright, the business partner of Lang Hancock.

Two of his grandchildren, Leonie Baldock and Alexandra Burt, represent the vast bulk of the estimated $4 billion fortune their father, Michael Wright, had amassed before he died. Mrs Baldock’s husband, Tim Baldock, a financial adviser by profession, heads the Applecross-based Quercus Group, which has, among other things, backed Matthew McNeilly’s Sirona Urban property development business.

Ms Burt has established the Landsmith Collection, a group of assets that includes Margaret River winery Voyager Estate, Northern Territory cattle producer Bullo River Station and South West luxury lodge Wallcliffe House.

However, there is an intermediate entity, VOC Group, which represented their father’s interests in Wright Prospecting, the massive royalty generator from which funds flow to the Wright descendants, including the Bennett family.

VOC is chaired by Jon Carson, whose deep experience as an energy and resources lawyer perhaps reflects the role the company plays as a protector of key assets rather than an investment vehicle.

Another newcomer to the scene is Persephone, which represents the private wealth of APM Human Services International founder Megan Wynne and some shared assets with her husband, Bruce Bellinge, who has his own fortune.

Ms Wynne recently appointed Melbourne-based Stuart Morley to the role of chief executive of Persephone, which manages her investments outside the great bulk of her family’s wealth in APM.

Mr Morley is one of the country’s most experienced advisers in this field, having worked in private wealth at ANZ and then at PwC where he was national private wealth leader for seven years and worked with leading family offices.

He said he had got to know Ms Wynne several years ago through the process of shifting from private equity to the ASX.

He said he was attracted to Ms Wynne’s investment objectives which, like APM, have a significant social benefit.

An example is for-profit specialist disability accommodation provider Sana Living, which is part of the Persephone portfolio.

“That is hugely attractive to me and the real reason I came on,” Mr Morley said.

“My values and her values have solid alignment.” Mr Morley said he had taken over Ms Wynne’s existing team and came to Perth regularly.

“The family office was already in place,” he said. “The team adopted me.”

Another player in the family office space that has emerged is Verona Capital founder Craig Burton’s Sky Alba, which has Darren Tootell as its investment manager.

Mr Burton has been one of the state’s most successful resources investors but arguably the greatest source of his wealth has been in his backing of Luke Mader’s monumentally successful mining services business Mader Group.

Sky Alba holds a 19 per cent stake in Mader worth around $240 million at current prices.

Structures

There are no hard and fast rules around the structure of WA’s family offices, although many still have the bulk of their asset base tied up in the founder’s original business, either directly as a shareholding, or indirectly as a royalty stream in the case of the Wright family descendants.

Some have completely broken that link. Examples are the descendants of construction giant Multiplex founder John Roberts, who are no longer connected to the business which listed on the ASX in 2003 and was acquired by Canadian firm Brookfield Asset Management in 2007.

Two of Mr Roberts’ children, Tim and Denby, are based in Perth. They have separate family offices although they are both based in the same building and are understood to share resources and make some parallel investment decisions.

Tim Roberts’ Warburton Group has been run by chief executive Darren Weaver since 2017.

Ms Roberts’ DR Capital chief executive Ben Bartholomaeus has been with the family office since 2009.

It is understood both offices employ investment director Hugh Currie, who is considered very senior in the family office world. He has been with both Warburton and DR Capital for the past decade, since leaving the nearby boutique fund manager, Packer & Co’s Investigator Trust run by Willy Packer.

Also in the geographic vicinity of Packer & Co, and linked by way of family connections, is McRae Investments, which is owned by the Clough family and was formerly the holding company for their stake in the eponymous Perth engineering firm Clough.

Reflecting the philosophies of its founder Harold Clough and his wife, Margaret, McRae is set up as a different business than many other family offices.

In effect, it is a venture capital firm, rather than an entity to manage the family’s affairs.

McRae chairman Stephen Quantrill joined McRae about 10 years ago and has run the portfolio on a day-to-day basis for most of that time, taking board roles and, in many cases, executive chairman or director positions in the various companies that McRae has significant stakes in.

The business has a small staff and, as ASIC records show, three of Mr Clough’s grandchildren are directors alongside Mr Quantrill, who has continued in the role since Mr Clough died in 2022.

“Harold wanted to start and build businesses,” Mr Quantrill said. “That is what his interest and passion was.

“He had zero interest in holding interests in IBM or Coca Cola.”

Strategically, McRae sees its stakes through until the investment is realised or might otherwise no longer be dependent on the McRae balance sheet.

Mr Quantrill said that at this stage McRae was not looking for new investments as it sought outcomes from its existing portfolio.

Enterpreneur Rod Jones says trust is important in a family office. Photo: Attila Csaszar

Trust

A decade ago, entrepreneur Rod Jones said he realised he was not doing a good job of managing his private affairs, with his attention on the main business, running then-listed education group Navitas.

He had worked with Jon Biesse on a previous project and had got on well. “I was full-time CEO of Navitas, that is where I focused my energy, but you generate a few funds and sold down part of the Navitas holding and found I was not managing it particularly well,” Mr Jones said.

He said Mr Biesse handled the day-to-day management as well as dealing with the large number of opportunities that came knocking on the door of wealthy people, a volume that could be difficult to control.

“As soon as people know you have a bit of wealth, they are all over you like a rash, I was not dealing with it effectively,” Mr Jones said regarding the period before he established Hoperidge as a family office.

No longer in an executive role at Navitas, he is in the family office most days and involved in investment decisions.

As well as having experience in disciplines relevant to running a major investment portfolio, Mr Jones said that a key non-family player had to have the capacity to build relationships and, unsurprisingly, be trustworthy.

“It comes down to knowing you can trust them to do the right thing,” Mr Jones said.

“It is the ability to build trusting relationships.

“We have done that with other family offices here and over east. “If you are co-investing you have to make sure it is with like-minded people.”

Mr Biesse said there was a surprising amount of interaction between family offices and Hoperidge had joint investments with half a dozen or so.

“It is relationships based,” he said.

“We don’t see any of the other family offices as competition.

“They are very collegiate, not competitive.

“That is a big part of it, it is not comparing performance with the other guy, it is a different mindset.

“The best deal flow tends to come from other family offices.” Mr Biesse said Hoperidge operated very much as a venture capital-private equity fund model, although it was increasingly being involved in less direct investment and more of an “allocator”.

“That is part of the evolution,” he said.

Working with a family office was still a relatively rare role, Mr Biesse said, despite the rising numbers of such entities based in Perth at a scale to sustain permanent staff.

He said such work had unique traits.

“There is a high level of trust,” Mr Biesse said.

“You are dealing with the inner workings of families.

“It is a fairly small sector.

“You don’t study family offices at uni.”