Interview with Cresset Partners and Oak Street Funding

September 8, 2020 Oak Street Funding

Adam Farag: Hello, everyone, I got Chris Boehm of Cresset Partners here with us today, going to go through a little Q&A. We work with Cresset here and I've worked with Chris Boehm for a couple of years now, so I wanted to get an interview out here. We're going to ask a few questions. So we're going to start with the easy one. Just tell us a little bit about yourself, Chris, and Cresset and go from there.

Chris Boehm: Sure. Thanks, Adam. Happy to be with you today. I'm Chris Boehm, as you mentioned. I am involved in both aspects of our overall Cresset business. I'm managing partner for our private capital business, which is our direct private equity investing platform. And I also lead all of our strategic and corporate development efforts for Cresset Asset Management, which is our RIA and multifamily office service platform, which has obviously been the basis for our relationship with Oak Street, where we've worked together. We've consummated three acquisitions into that business over the last couple of years. So I lead both of those efforts and play a broader role from a leadership perspective across all of Cresset. Cresset I would describe as a large multifamily office platform. We are, as I mentioned, actively involved in serving clients today, approximately 10 billion dollars of client AUM in our wealth management RIA family office service business. And in parallel with that, separately, but associated with that, we operate a series of direct investing, private investment platforms, both private equity as well as real estate and some other associated asset classes, including private equity secondaries. So we are building out a multifaceted platform focused on working with families to provide families access to very sophisticated investment management and the office services, as well as access to institutional quality, long term private investments.

Adam Farag: Got it, good deal. When you guys got started, which, you know, was three or four years ago now, I think three something, what was really the long term vision?

Chris Boehm: A few aspects I'd like to speak to. One, it was indeed a long term vision with aspirations to build what we would like to refer to as one hundred year business. And the intention is for this platform to be permanent, we permanently capitalized the firm and think about strategy and growth opportunities with a very long term time horizon in mind, as we think that is relatively unique and differentiated in this market relative to other firms that are perhaps backed by institutional capital and operating on a shorter time horizons, investment horizons. So very much a long term orientation over that time horizon. As I mentioned earlier, partnering with families, working with families, who themselves their time horizons are quite long. So we think that alignment is very powerful. And the intention was to build a multifaceted platform, working with those families, providing services, helping to educate their next generation, deal with the transition issues, state planning issues, tax issues, all of the complexities that the families of wealth face and need to deal with and in doing so, create something we think is really unique and differentiated. It works, those families in a way that there really aren't any other solutions. At least we didn't believe were out there at the time when we started down the path. So we aspire to build that into a very large enterprise and a lasting and sustaining enterprise with a long term time horizon in mind.

Adam Farag: So one question that I've been really excited as we were kind of doing, this whole thing that I've been excited to ask you guys just in the space growth is a really big thing right now in the RIA space. Everybody's growing, people are acquiring, but you guys are up to nine or 10 billion of AUM in three years. That's exciting. And when you planned, how did you plan to get to that big that quick and really kind of jump on to the scene in the RIA space?

Chris Boehm: We've all along thought about our growth strategy in a few different channels, if you will, for lack of a better term, one, recruitment to organic recruitment of teams largely out of private bank settings, which to date has been the primary growth driver from an organic perspective and has had quite a bit of success in that area and that's been the primary driver from an organic standpoint. Along with leveraging the broader network of our founders, our team, our advisory board, et cetera. All of them have really played a part in creating this broad ecosystem that is supported by very substantial organic growth. And then the intention would be to pair that with two other growth strategies, one being ultimately over time, identifying culturally compatible teams in a more traditional lifestyle context, where there's a set from a cultural perspective, where there is a fit from the client perspective that is not to date been as high a priority for us, but certainly would remain open to the right types of situations there over time. And then thirdly, where our relationship with Oak Street has come to bear is targeted, very thoughtful acquisitions and other partnerships with existing independent RIA's where we feel like the right strategic fit exists for the right cultural fit exists, where the principles of those other firms are looking to accomplish the same things we are similarly long term time horizon. And we feel like the coming together could really be adequate to help them serve their clients better, help them create the right for the long term development and career opportunities, their team and at the same time help accelerate our growth strategy. So we view this as multifaceted and we feel very fortunate that we've been able to be successful across the board, where importantly, acquisitions are an important part of that. But they're not the overall strategy, in contrast to the other strategies out there that are largely acquisitive and more of quote unquote roll ups, which we don't consider ourselves to be.

Adam Farag: Great. Good stuff there. Now, a little bit easier one, how did you hear about Oak Street?

Chris Boehm: How did we hear about Oak Street? A couple of different referrals as we were getting started and really ramping the business back two plus years ago at this point as we were starting to actively look for the first acquisition opportunity that we thought would be exciting to add on the platform. We had built relationships with various advisors, lawyers and others, consultants, et cetera, around the sector. And part of my duties fell on me to identify who the right players were in a financing perspective. And we were referred through both of our outside counsel at the time is now our our in-house legal team, a woman named Noelle Goodrow who had worked with Oak Street on previous financings and had terrific things to say. So came with strong endorsements. So pleased to meet Rick and you and Kirsten others and build the relationship.

Adam Farag: I remember on our first call thinking "wow this a great way to go into a relationship getting referred by multiple people," I think within the same week, wasn't it?

Chris Boehm: It was, that's right.

Adam Farag: With that, what made you decide to use Oak Street as a strategic partner for acquisition capital?

Chris Boehm: I think a few elements ultimately, telling you something you don't know, but as we got to know your team better it became clear that this was very much a strategic market for you. This is a core long term growth focus for Oak Street in terms of building a leadership position in the RIA sector. So that depth of knowledge, experience, understanding of the business, understanding of how to think about these businesses, how to underwrite them, and, you know, a genuine long term strategic commitment to building a business and growing, were all really critical from our standpoint. Versus much less informed capital that would have undermined our confidence in your ability to deliver. You had demonstrated a strong commitment and investment in the space, knew the space and gave us confidence you would be able to be a partner with us both with the initial transaction, which we pursued in late 2018, but importantly, given our growth aspirations that you had equally ambitious growth aspirations over time, we could grow together.

Adam Farag: Perfect. Yeah. I mean, it's been it's been a great couple of years watching you guys grow. And, you know, I'm really glad that we got the chance to get working with you as early as we did. Is there an example that you can think of where you felt Oak Street went above and beyond to deliver for your organization?

Chris Boehm: Sure, there are many along the way. This is required on both parts, a vision of a long term partnership and growing together and staying committed to that along the way, you know, no financing is ever easy, no partnership is ever easy to consummate and grow, but we've managed to. Most recently, most notably, very substantially expanded our relationship with Oak Street in terms of the size of our financing facility and worked closely together to bring in a terrific new partner as well that expanded that facility, which itself is obviously never an easy thing to do, there's always complications involved. But we managed to do that successfully here in the first or second quarters of 2020. In the face of incredibly unusual times, in the face of a global pandemic. Enormous market correction occurred during the underwriting process, yet in the face of all that and through all that, you and our other partner remained committed to getting this done and ultimately delivered. Which we're tremendously grateful for. The ultimate testament, as I said earlier, to your commitment to the sector for the long term and belief in the long term vision for what we're doing.

Adam Farag: Thank you for saying that, know, it's definitely a ride getting through to getting the second deal done, but glad we were all working together to have the same vision. You know, moving past this acquisition and on to the future, how do you see us, our relationship impacting the business in the future?

Chris Boehm: Yeah, continue to be very positive. As I mentioned earlier, we expect and intend to remain acquisitive and continue to, in a smart, targeted way, complete additional strategic partnerships with other firms that we think makes sense and having a strong and growing financing partner alongside of us to accomplish that is going to be obviously critical. So our expectation is to continue to grow very significantly with acquisitions as part of that. And we were excited about having you as our partner to move forward to continue to do that.

Adam Farag: Thanks for taking the time today to tell us about the relationship.

Chris Boehm: Happy to do it. And again, very much appreciate all the support and partnership. We are excited for what the future holds.

Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.

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