Guggenheim's investment group is international in scope-North American operations are run out of the New York, Chicago, St. Louis and Santa Monica, Calif. offices; Latin America is based in the Miami office; Asia is handled from Hong Kong; and Europe is done from Geneva and North America. "One advantage of our team is that we have people who've lived and worked in every major economic geography on the planet," Stucke says.
Stucke and his team categorize assets into four classes: equity-like (highly correlated to equity markets); assets not highly-correlated to equities; real assets (those that adjust for inflation and deflation); and cash and similar vehicles. Conservative accounts have smaller equity risk exposure and lean toward fixed income, along with relative-value and arbitrage-oriented hedge fund assets. Bold portfolios tend to have more equity risk exposure, and are more volatile with higher expected returns.
How did the portfolios do against the overall market in 2008? "If we knew last year would be a year where markets would decline 40%, we'd have very different assets in our portfolios," Rosenfield says. "That said, we designed portfolios . . . where people were materially protected relative to overall market declines." He adds that they didn't have any client defections as of March.
Growth Prospects
Swiss-born Meyer Guggenheim and his family immigrated to Philadelphia in 1847 when he was 19. The family was poor, and Meyer started out as a peddler before he eventually became a successful importer of Swiss embroideries. In 1881, he acquired interests in two Colorado lead and silver mines that hit pay dirt and ultimately generated a multimillion dollar fortune. He later formed the Philadelphia Smelting and Refining Co., which bolstered the Guggenheim's financial empire. The business passed on to Guggenheim's seven sons; some played major roles in the company, while others made their marks elsewhere in art, politics, science and philanthropy. One went down with the Titanic.
The Guggenheims became entrenched in New York, but in 2006 Guggenheim Investment Advisors returned the legacy to its Philadelphia roots, in a way, when it bought Private Family Office. With more than 70 family office clients, Private Family added a new dimension to Guggenheim's wealth management unit and has been a complementary fit for both sides.
"It's a marriage between a services firm like ours that had no investment capabilities and a firm like Guggenheim who were investment only," says Robert Fedoris, a 20-year vet at Private Family who became president and CEO in 1998 and still heads the operation. "Both of our clients benefit from each other's services."
The Private Family acquisition was successful, but another acquisition from around that time didn't fare as well.
The company acquired Klarberg, Raiola & Associates, a New York-based firm that represented more than 600 professional athletes, entertainers and high-net-worth families. Guggenheim eventually severed relations with the company. "That wasn't the smoothest fit," Rosenfield says. "The business management of athletes and entertainers is a different type of business. That's not what we do. We're a family office and an asset advisory firm." Rosenfield says Guggenheim maintains growth aspirations, albeit carefully measured. The firm will open offices in locations that make strategic sense, and will grow its client base accordingly. "We'd be happy to have another 100 to 200 clients," Rosenfield says.
"We only try to serve people who we think we can help, and that's those with between $25 million to $50 million minimum. To our knowledge, that's a channel that's reached just by reference. I don't see large-scale advertising being efficacious," he says.
Meanwhile, Guggenheim is hanging its hat on its independence from the big Wall Street banks and other large financial services firms who have products to sell. "The wealth management space is mostly small, independent organizations or big organizations that are fundamentally conflicted," Rosenfield says. "There aren't many sizable organizations that are independent, and I think we're one of them."