The craft of investment

Hannah Langworth speaks to Stan Miranda, founder and chief executive of Partners Capital, an unusual specialist investment firm

Why does Stan Miranda, Chief Executive of Partners Capital, think students should be interested in joining his firm when they graduate? "I would recommend working for Partners Capital to anyone leaving university with a strong interest in the investment world. It's like getting an MBA in investment management - you learn about all the different asset classes, from equities and property to commodities and credit. You'll also work on portfolio strategy, investment strategy, risk management and currency hedging, learning these crafts and becoming an expert. Our graduates learn about the full menu of investment subjects."

Masters of the universe

So what exactly does Partners Capital do and for whom? Stan talks about his own career to explain: "I was the Chairman of the Executive Committee for Bain & Company, the world's largest private equity consultants. We focused on advising private equity firms on their corporate acquisitions, and often invested in these deals alongside giving our advice, eventually reaching the point where the gains we earned through our investments exceeded our consulting fees. I then decided to extend this involvement in investment by founding, in connection with other parties, a venture capital firm. When the technology bubble burst in 2001, I decided to diversify my personal assets away from just investing in private companies in this way and into safer investments like hedge funds, bonds and commodities. I set up Partners Capital to help me, and others like me, to do so."

Partners Capital now manages the money of a selection of wealthy individuals and small institutions, normally with between £50 million to £1 billion each to invest. The institutional side of the client list includes "12 Oxford and Cambridge colleges and many of the prominent museums in London, including the British Museum, the National Portrait Gallery, and the V & A". Where individual clients are concerned, Stan says: "They include the founders of some of the most successful private equity funds in the world." But why don't they manage their own investments, given their day jobs? Says Stan: "These are the most time-poor people on the planet, so they need Partners Capital to provide advice and then execute the agreed strategy for them." Clearly these individuals still take a very close interest in what's happening to their money: "They certainly don't just agree to what we suggest straight away! I'd say they eventually follow about 95 per cent of our advice, 50 per cent of that without arguing." As Stan points out, there are huge advantages to having a client list boasting such expertise and strong opinions: "In every meeting we have, we learn from our clients - we've always thought that we'll have greater investment success if what we do is informed by the views of some of the best investors in the world, so our universe of input includes our client base."

Mix and match

Partners Capital offers a personalised investment plan for each of its clients. Says Stan: "Investment success is about rigorous discipline. It starts with understanding a client's risk profile and their objectives. We then match assets and an overall portfolio strategy to that risk profile and those objectives, and then monitor the portfolio's performance against the right benchmarks, ensuring we're open with the client about what's going well and what's going wrong and how we're changing things over time. We have quarterly client meetings, where we review clients' portfolios with them against changes in the macroeconomic environment. Every client meeting results in a tailored outcome."

Despite the bespoke nature of the service, Stan explains that there are some unifying principles to the way in which the firm approaches its clients' investments: "Firstly, multi-asset class diversification - instead of just investing in shares, there are strong arguments for diversifying across shares, bonds, private equity funds, hedge funds, credit funds and property. Secondly, rather than attempting to be experts on all asset classes, we research asset managers in each asset class and identify the best for each of our clients, who then invest in these asset managers' products. Thirdly, we move our clients' money around to take advantage of opportunities in the market. Doing so is challenging, because timing the markets is difficult, but we have an excellent investment advisory committee of economists, veteran investors and some very distinguished shareholders who help us think about the changes in the world that we should exploit."

What is Stan advising his clients to do to weather the economic storms of the past few years? "Avoid depending on equities. This asset class, typically the bedrock of investment portfolios, is now unreliable as a source of short and medium-term returns, and possibly even for the longer-term. Fortunately for our clients, there are a number of asset classes like credit, absolute return hedge funds and property in which we have a higher level of confidence. With property, for example, you know there will always be demand for certain kinds of buildings in certain places, like Kensington or the City of London, where it's almost impossible to increase supply. Where you see this kind of demand and a supply shortage, you should invest."

Head start

Stan thinks that students interested in a career in investment should think carefully about what sort of role they ultimately want when deciding where to start their careers: "The real reason to come here is because the role itself is so interesting. At an investment bank or a consulting firm, you're generally advising people rather than making choices yourself. If you go into private equity, you might spend two years working on ten deals and only one will happen, if you're lucky. In fund management, it's not always clear what impact you're making as an individual because the markets have such a big effect on what happens to your investments. At Partners Capital we make real decisions for our clients every day and have to take responsibility for those decisions."

Having convinced us of the value of the service that Partners Capital provides, we asked Stan what the role of a graduate joining the firm would involve. "The first few weeks include an induction and some important initial training. After that they'll spend half of their time as part of a five to ten person team with specific research responsibilities in relation to a particular asset class, and the other half of their time working on their client portfolios. You get very involved, very quickly."

Partners Capital recruits around five to six graduates a year, so what advice does Stan have for students who are interested in becoming one of them? "Read David F. Swensen's Pioneering Portfolio Management. It's a book written by the Chief Investment Officer of Yale University, whose investment philosophy based on asset diversification is one of the world's most highly regarded, and it's streets ahead of other publications for anyone wanting to understand how to invest. If people have read this book when they come for an interview with us, it'll make all the difference in the world." So how can students get an interview? "Send a great CV to"

As with his approach to investment, Stan brings clarity and logic to what is a complex and exacting business - it's the mark of a master craftsman. If you can emulate his approach, you'll fit in well here.