Silvercrest's Silver Lining
Assets at this still little-known but publicly traded wealth manager have risen 48% a year since its 2002 founding.
Last June, Silvercrest Asset Management Group (ticker: SAMG) went public -- a fast-growing money manager led by the former Donaldson, Lufkin & Jenrette veteran G. Moffett Cochran. In many ways it was a great year for the upstart firm, which manages $8.1 billion in private-client assets. In September, after total assets rose 48% a year on average since its founding in 2002, Silvercrest finally reached Penta's 2013 list of Top 40 Wealth Managers ("Seeking Higher Returns," Sept. 16).
In November, however, the 63-year-old chief executive passed away. Cochran had, for the past decade, been quietly battling pancreatic cancer. The market reacted in its unsentimental way -- Silvercrest's shares closed the week up almost 1% after the announcement. A month later, smooth as silk, the board selected Cochran's carefully groomed heir, Rick Hough, who had risen through the ranks over 11 years and in 2010 was named chief operating officer.
Therein is a lesson in dignified succession planning -- both on a corporate and personal level. None of Silvercrest's 402 wealthy clients have left since Cochran's passing.
That's because Cochran had for a long time carefully planned his succession. When last spring the firm went on its initial-public-offering roadshow, investors peppered Cochran, asking, "What's your succession plan?" Known for his Southern drawl and dry sense of humor, Cochran pointed to Hough and said, "Here's my succession plan," adding, "but not yet."
One semiretired investment banker deeply loyal to Cochran -- let's call him James -- explained why he is staying on at Silvercrest after doggedly following Cochran from bank to bank for the past 20 years. James was among Silvercrest's first clients and had referred friends and family to the firm, among them his sister and mother, while also tapping Silvercrest for his numerous trusts.
"The transition was very comfortable, even in a very uncomfortable situation," says James. He viewed the "seamless" passing of the baton as a testament to Cochran's and Hough's management skills. He has also warmed up to Hough, saying, "As a client, I trust Moffett's judgment and agree with everyone at Silvercrest that [Hough] is the right guy to take the company forward."
James is still active in a number of private companies, and his diversified Silvercrest portfolio is structured to counterbalance these concentrated private-equity type investments. "What I like about Silvercrest is that they never overpromise but always overdeliver, and I know I can sleep well at night because of that," he says.
James is partially and obliquely referring to the track record of Silvercrest's managed equity portfolios. Among Silvercrest's primary in-house offerings are a half-dozen equity strategies run by portfolio manager Roger Vogel, 57, and his five-person team. Vogel's strategy is to find underappreciated stocks, project their earnings growth, and discount those estimates into current-day dollars. Vogel and his analysts manage about $5.3 billion in assets.
As of Dec. 31, 2013, all of their equity funds and strategies have significantly outperformed their respective Russell benchmarks, net of fees, since they were launched between 2002 and 2005. Among Silvercrest's star performers are its Equity Income fund, which produced 11.4% annual returns, versus 8.21% for its Russell benchmark, and its Focused Value, which produced 10%, versus the Russell's 7.8%. For more on Vogel, and a few of his stock picks, see end of story....MORE
