Jennifer Steans, the South Chicago-based stewardess of her family’s fortune, is reaching out to billionaires across Asia to forge investment partnerships and offer them a gateway into the US.
She has already handpicked two Asia-focused private equity funds, Wavemaker and Asia Partners, and is in talks with family offices in both Hong Kong and Singapore about cross-border deals.
Increasingly, the world's wealthy elite are tapping their personal networks to source profitable deals rather than employing private bankers that have traditionally performed the role of matchmaker. A survey by UBS, the world's biggest private bank, suggests that four in 10 rich people source deals through their own personal connections and fewer than one in five use financial advisers.
Family offices are usually tight-lipped about their plans but Steans has broken ranks and offered FinanceAsia a rare glimpse into how the mega-rich make their money.
She is heiress to a fortune amassed by her late father, Harrison Steans, who orchestrated a series of lucrative US banks deals, including the sale in 1987 of Tampa Bay area lender USAmeribancs for $250 million in stock.
He and Jennifer founded a family office called Financial Investment Corporation (FIC) in 1994 to grow the family’s nest egg by investing in private companies, real estate and fixed income. The father and daughter team worked together in the Chicago-based family office until Harrison’s death in February.
Together, the duo notched up an impressive 23% internal rate of return over 25 years. From less than $500 million in 1994, FIC’s assets under management have also since swelled to almost $2 billion.
Now, as 56-year old Jennifer Steans looks to help her relations avoid frittering away their fortune, the “shirtsleeves to shirtsleeves in three generations” phenomenon, she is looking to Asia to build relationships with other like-minded dynasties.
This is where a lot of growth in the world is. They think very long term, as do we, so if we're going to really diversify as a family, trying to come to Asia makes a lot of sense,” Steans told FinanceAsia during an interview in Singapore.
Over the past seven years, rich people’s wealth in the Asia Pacific region has grown by 92%, significantly higher than the global average of 62%, according to a 2019 study by consultancy Capgemini.
For the first time, there are now more super-rich Asians than super-rich Americans, Credit Suisse's latest annual wealth survey shows.
Family-run businesses still make up a significant proportion of Asian economies, unlike in the US, where disgruntled investors have successfully pushed for them to be dismantled. In the less mature Asian markets especially, billionaires have benefited from preferential access to deals, favourable regulation and attracted the best talent to work for them. As a result, their sprawling conglomerates have successfully outperformed pure-play rivals.
That is, until recently. The US-China trade war has hit high-net-worth individuals' investment portfolios hard, shaving 3% off their wealth in 2018, the Capgemini study shows.
In a double-whammy, accelerating digital disruption and more mature economies mean their families' conglomerates will have to restructure to survive. Their collective financial performance dipped below that of pure-play companies last year for the first time in 15 years, according to research by consultancy Bain.
A few Asian dynasties have spotted the danger and are overhauling their sprawling empires so they are better positioned for the coming decades by making more use of their large data troves, selling less promising assets and exploring new partnerships. Indonesia’s Riady family is one example of a dynasty grasping the nettle. Thailand’s Chearavanont dynasty is another.
“The families over here think so much longer term than in the United States,” said Steans, who is interested in buying assets from Asian family-run conglomerates or co-investing alongside them.
ASIAN EXPANSION
FIC’s venture into Asia has been a long time in the making, driven by an appreciation of the growth of the region’s economies and by the long-term planning and strong family values embedded in many of the cultures.
“My dad had been on me for 15 years to try and start a more Asian strategy,” Steans said.
The investment team already has an affinity with the region. Steans’ partner Ken Hooten, for one, is from Korea and his wife is from China. FIC has also leveraged its US relationships to make introductions in Asia.
To be sure, not all relationships work out well. Steans sits on the advisory board for one of US private equity firm Carlyle’s funds, Carlyle Asia Growth Partners III, LP. It infamously invested in China Forestry and China Agritech, both of which regulators have accused of fraud. The California Public Employees' Retirement System’s website shows a negative return of -1.5% for the fund.
Steans is philosophical about the experience. “It was a good way for us to start learning and we toured with them around Asia,” all part and parcel of “trying to figure out who to trust here” she mused.
For now, she has turned her sights on Southeast Asia. The digital transformation sweeping the region is driving entrepreneurialism and minting billionaires. An oft-cited report by tech giant Google and Singaporean wealth fund Temasek notes that the region’s internet economy hit $100 billion in 2019, more than tripling in size over the last four years. By 2025, they forecast that the internet economy will have expanded to $300 billion.
The plan is to start by buying into Asian-focused funds and gradually become acquainted with Asian families, before working on co-investments together.
“We’re open to trying to find people that we could end up partnering with for a really long time,” Steans said.
Jennifer hopes to foster relationships between Asian companies and her portfolio of companies in the US. FIC has also invested in a Singapore-based budget-hotel booking startup, RedDoorz, via Asia Partners. RedDoorz has a similar business model to a firm FIC has already backed Stateside called Stay Alfred.
In her particular area of expertise, banking, she is also looking for tie-ups in payments for her portfolio of US financial institutions. To her mind, US banks could be energised by tips from Asia on financial technology, particularly in how they manage payments.
“They’re way ahead of the States in payments here, because they are not tied to the old bank system,” she told FinanceAsia in between back-to-back meetings with entrepreneurs and financiers in the Lion City. “Where we can be really helpful is if they are actually looking for partners in the United States.”
FUND MATCHES
In one of its first deals, FIC committed $20 million to Singapore-based Asia Partners’s first fund, which is run by Nick Nash and Oliver Ripple. Nash was previously group president of Singapore-based ecommerce and digital entertainment firm Sea while Ripple was formerly the CEO of B2C ecommerce for South Africa's Naspers.
First-time funds tend to struggle to find investors because many are leery of managers with no track record. Steans takes a different tack.
“They’re hungry. They’re young. They’ll work really hard to prove themselves. So if you find the right people, we tend to think ... you can do really very well with [ first-time funds],” Steans said. “We like being partners when someone needs a partner.”
The average age of entrepreneurs when FIC first backs them is somewhere in the early 30s.
Another fund she has backed is the venture capital firm led by Paul Santos, Wavemaker Partners, which counts the ecommerce platform Zilingo headed by Ankiti Bose among its investments. FIC has committed $10 million to Wavemaker.
Unlike many family offices where family members limit themselves to advisory roles, Steans is on the frontline making investments. The bubbly lady seems to relish meeting entrepreneurs, and like her father, cutting deals.
The former high-school maths teacher oversees about 20 employees at the family office and also serves as a trustee for the non-profit Steans Family Foundation.
“She's the first one at the office. And she works like crazy,” said her investment partner Hooten.
Steans’s method is to start with a small investment. Initially, FIC puts in about $10 million to $25 million. If she then sees a good return then more capital is deployed. “It's a very basic feed the winner strategy,” she said. And it can build up.
“If you look at our top five entrepreneurs, we've invested probably over $800 million,” Hooten said.
The aim, as Steans and Hooten deepen their connections in Asia and win the trust of the region's entrepreneurs, is to be able to bypass fund managers and make more investments directly into privately run companies. Steans's goal is to have 12 or 15 companies with $100 million invested in each one.
When reflecting on the most important lesson she learnt from her late father, Steans is thoughtful before replying: “Don't be greedy” and “find out what's really important to your partner.”
With assistance from Elizabeth Utley
