The Private Equity Firm That’s Winding Down to Invest ‘Permanent Capital’ in RIAs

Rosemont, which made more than 30 investments in wealth and asset managers, is now investing for a “mini-Berkshire Hathaway.”

Illustration by RIA Intel

Illustration by RIA Intel

Rosemont, a private equity firm focused on wealth and asset managers, is winding down its business so that it can invest “permanent capital” on behalf of the insurance company Markel Corporation. The private equity firm has never paid sellers the highest prices they could probably find, but Rosemont says its philosophy and strategy, coupled with Markel, make it an ideal investor for many RIAs, including one this week.

On Monday, the Rosemont Investment Group, formed to partner with Markel in 2018, closed its first deal with a private wealth manager and second deal since it was established. It is now a minority investor in Veris Wealth Partners, a San Francisco-based firm that manages $2 billion in assets. (In 2019, the group made its first investment in 1607 Capital Partners, a closed-end fund manager with $3.8 billion at the time.) Rosemont plans to remain an investor indefinitely, if the companies want them to be.

“It’s a very different model than the private equity fund model,” Brad Mook, managing director at Rosemont, told RIA Intel. “Our philosophy has always been that employee-owned and controlled investment firms are the ideal model.”

Rosemont was founded in 1988 as a researcher and consultant to employee-owned wealth and asset managers. After 12 years, Mook said it made sense to also become a minority investor in some firms, so the company created Rosemont Investment Partners and raised $270 million across three private equity funds. The third fund, which is still active and expected to run through 2025, will be its last.

After more than 30 investments, Mook said, Rosemont found that the private equity “treadmill” — continuously raising capital, sourcing deals, and selling stakes — often wasn’t the best way to financially support the companies it targeted.

In 2018, Rosemont decided to partner with Markel, an insurance company that Mook said overtly labels itself a “mini-Berkshire Hathaway.” The insurer always liked wealth and asset managers, and while it lacked the experience to invest in them with confidence, it did have the “permanent capital” that some RIAs are seeking, according to Mook. On their behalf, Rosemont plans to make minority investments in as many as 10 wealth or asset managers with roughly $2 billion in assets, and to never sell the stake.

Rosemont plans to close its private equity business entirely after its third fund. For now, Markel will be its only partner, but Mook said that it might consider co-investment opportunities in the future.

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In many cases, the boutiques seeking capital from Rosemont are firms with founders who own an outsized portion of a company and would-be successors who can’t afford to buy them out (a common, ongoing problem in the industry).

That was the situation at Veris: There was no heir apparent. Rosemont helped the founder get liquidity and democratize the Veris ownership. Now, no single employee owns more than 20 percent of the company, making succession more affordable for others in the future, Stephanie Rupp, CEO at Veris Wealth Partners, told RIA Intel. “I think this is a very smart, astute model,” Rupp said of Rosemont. “They come in and fill that gap.”

Minority investments don’t mean that Rosemont is any less invested in helping its companies. Rupp, who was previously a partner and managing director and the head of Impact Investing at Tiedemann Advisors, a New York firm with $18.4 billion in assets, says that Rosemont’s capital and advice, coupled with the tailwind behind the growing interest in ESG investments, could help Veris could grow into a $5 billion or $6 billion company in only a few years.

Veris, which builds ESG portfolios for high-net-worth and ultra-wealthy families, explored deals with other investors, including private equity-backed RIAs. For owners who are simply in search of the biggest check, those options might be a fit. But they might not suit RIAs who want employees to remain in control or have other factors to consider. For example, take Veris’s lobbying and proxy voting on behalf of its investors — would those cost centers be supported, or even tolerated, by another owner? “If you’re that kind of firm, you also want to stay independent,” Rupp said.

Mook said that Rosemont has always admired firms like Veris and believes the investment happened at an inflection point for the firm. “We’re incredibly excited to have this kind of partnership. For us, it’s just a fabulous match,” Rupp said. “I think Rosemont is setting a precedent that is really important for the industry.”

Unfortunately for an unknown number of other RIAs, there might only be eight opportunities with Rosemont left.

Michael Thrasher (@Mike_Thrasher) is a reporter at RIA Intel based in New York City.

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