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Portfolio > Asset Managers

The Top Wealth Managers 2012 Profiles: No. 1—Treasury Partners/HighTower

By Marlene Y. Satter

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One hundred firms make up AdvisorOne’s 2012 Top Wealth Managers, as measured by assets under management per client, with data as of 12/31/11.

Here we present a profile of the crème de la crème of the Top Wealth Managers—those 10 firms that topped the list in in our 2012 survey.

View the list of all 280 firms in our 2012 Top Wealth Managers survey.

Treasury Partners is an independent RIA within the larger multioffice, multicustodian HighTower, and its history is that of a brokerage team from a wirehouse seeking both independence and support from HighTower.

Says managing principal Richard Saperstein, “Treasury Partners was originally formed when I was at Oppenheimer.” There, in 1988, he began to build the team that would eventually become Treasury Partners. When Oppenheimer sold its private client business in 2003, Saperstein and his team “migrated to Bear Stearns, and after JPMorgan rescued Bear Stearns, we spun out in May of ’09 to HighTower.” HighTower itself, a multioffice RIA, has brought in a number of big names who went in search of independence from the wirehouse model.

“From an investment and client service standpoint, we operate within the confines of the Hightower structure,” Saperstein explains. “HighTower provides all the back office support we need to run the business, which includes legal, compliance, HR, payroll, benefits, desktop support, etc.”

That leaves Treasury Partners free to do what it does best. “Because we don’t originate any product or sell research or have competing sets of clients,” Saperstein says, “we are completely unconflicted. We have an open architecture platform, don’t represent any particular product or service, don’t inventory any securities, so we’re inherently free of any conflicts and answer only to our clients, not to any profit centers within the firm.”

Heightened Correlation

Saperstein says that 2008 “really did a lot of things to everyone in the business, and in particular it highlighted the value of prudent diversification. So, effectively, there is diversification among asset classes, and then within an asset class, diversification among securities. Those [firms] that did not fully execute suffered within that ’08 period.”

The second issue brought to the fore in 2008, he says, was “an unprecedentedly high correlation among asset classes.” Taking both of those factors into consideration, he says, “we clearly demonstrated that we properly diversified client portfolios and securities.” The heightened correlations also led the firm “to re-evaluate all correlations of asset classes, and in doing so we wound up adjusting all client asset allocations to take into consideration the new correlations.”

He continues, “In the ’80s and ’90s we were taught to buy large-cap, mid-cap, international, REITs, emerging markets, and ultimately if you diversify you’ll have lower portfolio risk. But a funny thing happened in ’08,” he says, “where everything went down. Diversification didn’t really provide the perceived benefits of the different asset classes.”

Based on that, Treasury Partners re-evaluated the correlations of all asset classes, so that now the firm builds portfolios “specifically to guard against heightened correlations and the downside risk when everyone is running for the same exit door from all the asset classes.”

Crisis Led to Referrals

The success of the strategy exercised by Treasury Partners during the meltdown and its post-crisis restructuring strategy, as well as client communication both during and after the crisis, says Saperstein, are the factors he believes responsible for referrals that have helped the firm grow. “It’s really amazing,” he says, “how great our clients have been in providing referrals, and how financial professionals have provided referrals. These endorsements have been one of the most defining characteristics of our platform.”

While the client list and the AUM may grow, Saperstein does not anticipate much growth in top leadership. He is the “overwhelming majority owner” of the four partners, who have “collectively over 100 years of investment experience.” He adds, “I don’t foresee adding more chiefs.”

The firm’s “small army” of staff is “very efficient,” he says. “We don’t do a lot of things in-house,” he concedes, “but what we do, we try to get a really deep knowledge and understanding of.”

For operations that they outsource and for outside managers, he says, “we spend a lot of time kicking the tires and understanding what they do and how they do it.” In looking for new staffers, he says, they look for “really bright, hungry people that want an opportunity.”

Issues of Concern

When it comes to issues that could affect the firm and its clients, Saperstein offers several points. First, he says, is “the Fed’s involvement in the yield curve. Effectively the yield curve has been nationalized,” he says, “through the zero interest rate policy or the quantitative easings. The Fed has manipulated the yield curve, and that has distorted the cost of capital for issuers.”

The second concern is the budget deficit. “Washington takes in $2.4 trillion and spends $3.6 trillion a year, and we issue Treasuries to cover that shortfall. That’s got to be corrected.”

The eurozone is third, with its chronic volatility. “The central currency is breeding—has bred—a major shortfall in amalgamating these different economic systems,” says Saperstein. “And unless there is a federal banking regulator and what I’ll call federalism, we’re going to have continued and ongoing volatility out of this very large part of the world economy.”

These are the three main factors “that concern me … from the perspective of having to decide what to do with my clients’ money.” The firm is an investment specialist, he says, “but we’re in an environment where these exogenous factors really can’t be evaluated based on the traditional experience that we have. It clearly makes the environment a little bit more uncertain, and as a result, we’ve got to reflect that uncertainty in client portfolios.”

He adds, “It requires us to evaluate things like the political landscape of the eurozone or the success of Washington in addressing the budget deficit. These are not traditional investment analysis. But ultimately, look: over the last 30 years we’ve had to learn from the school of hard knocks, and that causes us to be more cautious in these environments.”

For more on the 2012 Top Wealth Managers, please visit our home page.

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