Bessemer goes on defense, on pace for best year

NEW YORK Wed Oct 5, 2011 5:42pm EDT

John Hilton, CEO of Bessemer Trust, speaks during the Reuters Global Private Banking Summit in New York, October 4, 2010.REUTERS/Lucas Jackson

John Hilton, CEO of Bessemer Trust, speaks during the Reuters Global Private Banking Summit in New York, October 4, 2010.

Credit: Reuters/Lucas Jackson

NEW YORK (Reuters) - Portfolio managers at Bessemer Trust, financial adviser to ultra-wealthy U.S. families, took an extremely defensive posture a few weeks ago amid some of the most volatile financial markets in more than 80 years.

A sluggish U.S. recovery, an expanding debt crisis in Europe and political deadlock are just some of the factors contributing to wild ups and downs in stock prices. As markets convulse with growing frequency, often for no apparent reason, many small investors are heading to the sidelines.

Now, apparently, families with tens of millions of dollars at their disposal are also fleeing the market.

"Right now, 50 percent of our balanced growth portfolio is in cash, bonds and foreign currency," Bessemer Chief Executive John Hilton said at the Reuters Global Wealth Management Summit on Wednesday. "Historically, we'd hold only 20 to 25 percent (of cash and bonds) in the portfolio."

That change took place about two weeks ago, he said. August was the seventh-most volatile month in the past 1,000 months, he added, a period spanning more than 83 years.

"I think it's very hard to make any sense of it," he said. "There's just a general lack of leadership and a lack of confidence," not just in the United States but globally.

Hilton stressed Bessemer clients have not abandoned stocks completely, but the firm's in-house investment portfolios are more defensive than usual -- focused on capping losses as opposed to seeking the highest possible gains.

"Our clients are tremendously afraid of losing their wealth," Hilton said. "We're more comfortable taking a more defensive position, which will hurt us if markets go straight up, but we don't think they will go straight up any time soon."

Bessemer was formed in 1907 to manage the fortune of Andrew Carnegie business partner Henry Phipps. The firm opened its doors to other millionaire families in 1975, and since then assets soared from $1 billion to about $65 billion.

The firm's roughly 2,000 clients have on average $30 million of assets apiece. Bessemer and its 750 employees rank 13th in assets managed for U.S. multimillionaires, according to Barron's, on par with some global banks.

Business has soared in recent years as wealthy families left big banks humbled by the 2008 financial crisis.

Last year, Bessemer added 119 new clients with $3.2 billion in new assets as well as $1.7 billion of money from existing customers. Overall, assets grew nearly 10 percent. Two years ago, Bessemer attracted 170 clients and a record $3.5 billion in new assets.

Hilton declined to discuss rivals by name, but he said recent turmoil and controversy among big banks is driving business to small, private firms. Bessemer expects the number of clients to grow by 10 to 15 percent this year.

The scale of the business is much smaller, to be sure. Hilton seeks to add eight to 10 senior advisers this year to help serve 140 to 150 new clients. He declined to identify from which firms his firm was recruiting, saying only Bessemer is adding people from all corners of the industry.

"New clients are coming in at a slightly better pace than last year," Hilton said. "You don't read about us in the newspaper, we are very quiet, we have an unblemished reputation."

(Reporting by Joseph A. Giannone, editing by Matthew Lewis)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.