LP interview: Cambooya

Cambooya, an Australian family office that serves descendants of the founder of Fairfax Media, made its first commitment to a US-based VC firm three years ago. It has two relationships in the space and is working on a third. Australian VC is an even more recent addition, but interesting opportunities are emerging as the market matures. It is a good fit with Cambooya’s long-term investment horizon – and it helps bring the portfolio alive for family members.

“The primary driver is returns and we are cautious about valuations but giving the family members access is like a sweetener. There are qualitative components to our decision-making, so maybe we allocate a bit more. There might be one more relationship than we would otherwise have,” says Kathryn Young (pictured), head of investments at the family office.

This is part of a broader engagement agenda that Cambooya pursues with GPs to inform its own strategic thinking and to get the family members involved.

The four-person investment team covers multiple asset classes across a range of geographies – “I like to say my specialty is versatility,” Young notes – and relies heavily on advisors for the due diligence that underpins asset allocation and security selection. Any additional insights portfolio managers can share about where they see opportunities and risks, or how they are thinking about origination and valuations, are helpful in confirming or challenging accepted wisdom.

Engagement is generally casual in nature – Cambooya touches base with GPs several times a year – but on occasion, there are more formal teach-ins for family members. Individuals often have business interests that benefit from tapping into the family office network, and equally, they might offer advice that resonates with the manager or portfolio companies.

“We have a structural approach, and we are going to continue on that path. But we are a compact team covering a lot of ground, and these insights help us filter things that are coming our way, allowing us to say, ‘We don’t want to do that right now,’” Young explains.

“Once, we had a family member bring an opportunity to us, something they had sourced through their network. We had been hearing from our advisors and partners that pre-IPO space was getting really crazy, and we used that insight to help that family member let that opportunity pass.”

Dispersed wealth

For reasons of privacy, Cambooya does not disclose its assets under management or the number of family members it represents. However, the organization is unusual in an Australian context for its maturity. While many family offices are still presided over by a first-generation patriarch who still runs the wealth-generating assets, the Fairfaxes lost control of the business that carries their name in 1990.

Cambooya was established in the 1980s by Vincent Fairfax – a fourth-generation descendant of John Fairfax, who created the company that would come to own The Sydney Morning Herald, The Age and The Australian Financial Review – and his wife Nancy. They also set up the Vincent Fairfax Family Foundation for philanthropic purposes. Vincent Fairfax’s children and grandchildren now control the wealth, and a generation of millennials sits beneath them, which suggests dozens of beneficiaries.

The family office’s decisions are vetted by an external professional investment committee and then passed upwards to the boards of various companies and foundations that look after the interests of different groups within the family. These boards include family members and sometimes external professionals as well.

Most of Cambooya’s private equity investments come from a single pooled entity in which the different family groups hold units. The investment team has more discretion, but activities are still overseen by a professional board. There is also a private equity-focused sub-committee of the investment committee.

“We have more discretion over that entity because we can’t be building a book across family members whenever we want to do a deal, situations move too quickly,” Young says. “Sometimes we make allocations to managers outside of that entity and those decisions go directly to the boards.”

The private equity program is only six years old and Young describes the experience as a positive one, highlighting early decisions to use institutional quality advisors and build a globally diversified portfolio. It is currently split 75-25 between North America and Europe; StepStone Group serves as advisor in the former, LGT Capital Partners does the same in the latter.

There was an initial focus on secondaries to address the j-curve effect. Since then, Cambooya has widened its scope from generalist buyout strategies to include more specialists and venture capital and growth equity managers. The goal is to maintain a portfolio of no more than 20 GP relationships in the small to mid-market space, where the family office’s $5-30 million commitments constitute meaningful equity checks.

“It is getting harder to contain the number of managers as we work with specialists more,” says Young. “But we think that concentrating your best ideas is an important way to compound your returns over time. We are trying to resist the temptation to allow relationships to proliferate.”

Getting access

Cambooya’s selling points as an LP include the stickiness and long-term nature of its allocations, an ability to move quickly when opportunities are presented, and a pragmatic approach to due diligence. For example, the family office wants to work with GPs where there is an alignment of values on environment, social, and governance matters, but it doesn’t have a long list of exclusions and it doesn’t circulate extensive due diligence questionnaires.

Nevertheless, top managers are inevitably capacity constrained and getting into funds can be a labor-intensive process. “I had a meeting this morning with a GP that is a premier name and we have been putting the hard sell on them for a while, trying to get in and advocate for ourselves,” Young observes. “As we mature, we are more aware of who the top-tier managers are, so we will have to do more work.”

Co-investment, which began relatively early on, is consistent with the belief in concentrating resources behind strong ideas. Cambooya started in Australia, leveraging its relationships. The family office is now active globally through its advisors, but there is a desire to ramp up local exposure further, hence the cultivation of new GP relationships. There are currently four: two active, one that is currently co-investment only, and another in the pipeline.

Increasing deployment in Australia also helps address an Asia-shaped hole in the portfolio. Two major obstacles block the path to a 10% target allocation for the region: most managers use funds domiciled in the Cayman Islands and Cambooya pays significantly more tax on distributions emanating from this jurisdiction than others, so the minimum performance requirement is that much higher; and an inability – thus far – to find GPs that inspire real confidence.

The family office prioritizes transparency in its relationships, which is why the engagement and information-sharing efforts can be so telling. “It’s a lot easier to have these conversations with some managers than others,” Young says. “They are more forthcoming about what they are struggling with, and that’s what we are looking for – that honesty.”

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• Topics
• Australasia
• LPs
• Fundraising
• Australia
• Family office
• Co-investment
• Cambooya
• Asia