Business

Why Philipp Lennertz believes his family office can prosper in the downturn

German family office chief Philipp Lennertz learned to be wary of the advice which banks offered to their wealthy clients at an early age.

“When I was a teenager, I got to experience how poorly banks were treating their clients,” he said. “They mostly take a view on liquid assets and only have their bank products in mind, not the interests of clients. They don’t take a 360 degree view.”

Rather than a career in law, banking or the arts, Lennertz set his heart on becoming a trusted wealth adviser: “To offer the kind of service to clients that they never experienced.” 

If we look back in a few years time, I am convinced 2022 will be seen as a great year for opportunities

He now runs his Hamburg-based multi-family office Lennertz & Co. His family invests in the business, which advises 30 other families, plus 300 clients who access funds and deals via a platform managing 800 million euros.

To help get to the next level, Lennertz has hired Stefan Kamm who managed a family office for the late Heinz Hermann Thiele, who made his billions with lorry and rail brakes company Knorr Bremse. Later, Thiele became a 15% investor in Lufthansa, the German airline, criticising a state bailout during the pandemic, but later backing it. 

Lennertz is upbeat despite recent setbacks for VC: “We have reduced our exposure to equity by 10%. But we still believe in real assets. If we look back in a few years time, I am convinced 2022 will be seen as a great year for opportunities.”

After business studies, Lennertz learned the family office trade at Bad Homborg’s Sauerborn Trust, a UBS affiliate, then moved to a multi-family office led by Jens Spudy, a former banker.

Lennertz set up his business in 2015, at the age of 36, after buying a small asset management boutique and Oliver Piworus joined him from Spudy. 

Siemens engineering veterans Heinrich von Pierer and Klaus Wucherer joined his advisory board shortly afterwards. Lennertz went on to hire more talent from Bain Capital, Goldman Sachs and McKinsey and began to tackle VC deals.

In early 2020 Lennertz gained access to leading US VC funds by buying BPE Fund Investors, led by Andreas Odefey, which was once part of Berenberg Private Equity.

“BPE Fund Investors was our golden key ” says Lennertz. “For 16 years, the team had been investing with firms like Bain Capital, Canaan, Kleiner Perkins, Khosla Ventures and TCV which can be hard to access.

“When we bought the business, it managed $100 million. Now it’s $400 million. Since we took over we integrated further firms like Lightspeed and Andreessen Horowitz. There’s no company with this level of access.”  

Lennertz provides family office clients with loans, services and third-party funds. For portfolios it uses ETFs and active managers backing special situations in small cap and balanced strategies. Lennertz is not inclined to invest in distressed debt or hedge funds although his third-party managers can travel that way if they feel the need. 

Philipp Lennertz’ passion is private equity and venture capital, where he believes expertise and risk controls will continue to perform. He used to be an adviser to two Berlin-based VC firms, Cavalry Ventures and Cherry Ventures, prior to February 2022. 

Annualised returns of 30% for VC, and 24.1% for PE, over three years, as published by PitchBook, illustrate their recent success.  Rising interest rates went on to hurt valuations this year but Lennertz wants to stay the course: “Our current recommendation to UHNW clients is they should be 20% to 25% invested in private investments. But we have some clients who have 50% or even 60% allocated, particularly where they have been successful entrepreneurs. That’s unusually large for Germany.”

Lennertz’s first deal was EatHappy, a provider of Asian snacks, including sushi, which he backed in 2016 and sold 18 months later. Lennertz also found a useful niche in backing the development of Alpine chalets in 2018, despite its cautious view on real estate.

It invested in a family business called Stein SGS, which hires out roadside construction equipment, and sold a majority stake to IK Partners five months ago. It has backed Pinterest, Airbnb and Meituan. Including co-ownerships Lennertz has now tackled 30 deals, no doubt facilitated by the lure of its family office network.

One relatively new deal is Pepper Motion, which retrofits traditional buses and trucks to run on batteries.  The exercise appears straightforward but Lennertz says it needs software:  “Apart from Tesla, no one has their knowledge, or the number of decisive patents, like they have. They are five, six, years ahead of other manufacturers.

“It’s too expensive to retrofit cars. But it’s $150,000 cheaper to refurbish a bus than buy an electric bus from China. And, because of Germany’s decision to reduce emissions drastically, this needs to be done by 2030.”

Lennertz led Pepper’s latest $32 million fundraising. Founders Bastian Friedrich and Christian Wagner still control the venture. Würth Group, a fastenings company, is another investor. 

Lennertz has backed Ascend Sport Technology, which puts together digital perimeter advertising at football grounds; RapidAI which assesses stroke damage in minutes; Coursera, an Indian online learning company, where Lennertz nearly quadrupled its money; and Emmie Gray, a floral design outfit. 

Lennertz confesses he isn’t too interested in cryptocurrencies, which is just as well in the current environment. But he is fascinated by blockchain applications, for which his firm has put together a VC fund.

“Future winners are going to be companies which build their business case around, and on, the technology.” At the end of last year, it invested in Greenfield One, a firm which invests in Web3 solutions, whose other investors include Bertelsmann and Mike Novogratz’ Galaxy Digital. The bears may be prowling, but disruption is far from over. Lennertz willingly concedes the US is still the world’s leading player but he is keen to help Germany and its family offices close the gap. 

 

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