Ferd, a private investment office of one of Norway’s richest individuals, doesn’t mind telling everyone what it’s up to. In fact, in a world where the money of the richest individuals is often managed by very secret family offices, Ferd’s approach is extraordinary. Family Capital can only hope that it catches on.
Ferd tells you how much money it managers and is transparent about its performance, not just its overall performance, but the details as well. Add that in with its big commitment to social initiatives and Ferd offers a pretty good template of what a private investment office can be in the 21th century – transparent, professional and committed to bigger issues than just the family’s wealth. Family offices around the world should take note.
No doubt to the disappointment of some rich families out there, Ferd managers the money of Johan H. Andresen and two daughters, and no one else. Since the three of them are the only shareholders and none of them have any investments outside Ferd, this keeps everyone focused on the value creation inside the company. “By taking in another family there will have to be compromise of some sort,” he says. “I’ve even said no to managing the funds of my siblings and my mother.”
The limited numbers is one reason why Andresen doesn’t like to call the business a family office, because there’s very people involved. Another reason, he says, is that Ferd just acts as an investment group for the family. Don’t expect Ferd’s staff to be responsible for getting tickets for the family to the next Taylor Swift concert in Oslo this summer, that’s not what they are there for. They will, however, do the taxes for the owners.
The transparency side is all there to be seen on Ferd’s website, where it says it managed a hefty Norwegian Krone 24.9 billion (around $3 billion) in assets in 2014. The annual returns are there too – 3% in 2014 and 25% the year before. For those interested, all the numbers are on the website, even though the group is under no obligation to report these numbers. Presumably, from all this transparency, Ferd and the Andresens are pretty cool about paying their taxes.
Where does all the money come from? Like most great fortunes, a multigenerational family business was involved. Andresen’s great-great grandfather bought a tobacco company called J. L.Tiedemanns, which became the basis of the family business and their wealth for more than 150 years. Other businesses were added and sold along the way including a packaging company, a sports clothing group, a shipping business and a bank. The history, surprise, surprise, is on the website…BTW, Andresen is a deft hand at tweeting – he has more than 55,000 followers and tweets in Norwegian and English – @FerdOwner
In the 1990s, Andresen with his father decided to sell the tobacco business and use the money from the sale to convert themselves into an investment company. This was the classic liquidity event for the family. “With the sale of tobacco business we became a non-operational owner,” he says. “So we could change our identity and embark on a new path. We could change our name, move offices, and even work with a new set of values. We could be something different.”
Andresen says this complete split from the operational business allowed them to move on. He reckons other families can learn from his family’s experiences. “In many cases, families elect to keep their core business and that remains their identity. The lesson here is that regardless of the ownership situation, you benefit greatly from having decided before a wall of money reaches you, under what vision and values you would like to reinvest it.”
He adds: “You need to establish a separate entity, both legally, emotionally, and physically from the operational business. If you do not, then you will be unable to recruit top notch people into it, and then it does not matter how big the pile of cash is.”
Ferd did keep two of the businesses from the past – Elopak, the packaging business, and the sports equipment group Swix. “They became the base for us to acquire and be active owners of other businesses.”
Today, Ferd is split up into six areas – Ferd Capital, which deals with Ferd’s direct investments in non-listed business and well as some listed groups; Ferd Invest, which invests in Nordic listed businesses; Ferd Hedge Funds, which takes stakes in multi-asset global hedge funds; Ferd Special Investments, which covers investments outside of all the other mandates; Ferd Real Estate, which is an active real estate investment group; and finally Ferd Social Entrepreneurs.
The social side is, of course, about promoting better social outcomes for the groups and individuals Ferd decides to invest in. But it also has a generational factor behind it, says Andresen. “I’ve said to my daughters that we’re going to make the company so exciting that you won’t even think about making a single investment outside of Ferd.”
Maybe that’s the reason why the name Ferd was chosen for the investment – it means a journey without an end in Norwegian. But Andresen is a realist at the same time. “OK, that’s the idea. They can marry some guy who probably thinks he’s got some better idea.” His daughters, in the early 20s, are already shareholders, although neither of them work at Ferd, nor do they sit on the board.
As Andresen mentioned above, the staff of 43 at the investment office is very much part of creating the “breaking free” atmosphere for an investment office to succeed. Private investment offices are prone to developing conflicts of interest between the principal (the family with the money), and those brought into manage that money.
Often that conflict arises between the long-term investment horizons of the family, and the short-term salary and bonus ambitions of the staff. Andresen is very much aware of this and makes sure it doesn’t happen. “We don’t think in generational terms when it comes to investment. The stewardship model has very little place in our model – it’s just too far ahead for my colleagues,” he says. “I want my people to run fast, and they want to be measured on a more short-term basis.” Ferd has recently introduced an incentive system that bridges the long and short term interests giving staff a share of the mid-term value creation.
When asked about investment time horizons, Andresen is kryptic. “We do not care about calendars. We are always impatient, and can remain impatient for a very long time.” When pushed further he says: “There’s no external pressure on returns at Ferd, we don’t have a mandate. We’re accountable to ourselves and society.”
One thing is for sure is that Ferd and Andresen are pushing the boundaries of what an investment office can become in the 21th century. Don’t be surprises to see others learning from Ferd and adapting its practices in the years ahead. And that can only be a good thing.