Title: Capital Allocators – Inside the Institutional Investment Industry
Episode: Brett Barth and Evan Roth – Stewarding Family Wealth at BBR (EP.433)
Release Date: February 24, 2025

Introduction

In Episode 433 of Capital Allocators – Inside the Institutional Investment Industry, host Ted Seides engages in a comprehensive conversation with Brett Barth and Evan Roth, co-founders and co-CEOs of BBR Partners. Celebrating its 25th anniversary, BBR Partners oversees $32 billion in assets across 180 wealthy families. The discussion delves into BBR's evolution, investment philosophies, cultural foundations, and strategic decisions that have sustained their success over a quarter-century.

Early Days of BBR

Formation and Initial Vision

Evan Roth recounts the inception of BBR Partners in early 2000, amidst the dot-com bubble. The firm began with five young professionals—primarily from Goldman Sachs and GAM—who shared a unified vision of providing peace of mind to wealthy families through bespoke financial management.

Evan Roth [06:52]: "Our goal is to provide peace of mind that their financial needs will be met. We wanted to do this differently from the traditional banking model."

Starting from Scratch

BBR Partners operated out of Brett Barth's apartment, navigating the volatile market conditions of the early 2000s. Despite the dot-com crash, their diversified and sophisticated investment approach allowed them to protect and grow their clients' wealth effectively.

Brett Barth [09:01]: "We nailed the investment philosophy from the beginning. It worked well out of the box by making money, not losing money."

Investment Philosophy

Beyond Traditional Allocations

BBR Partners eschews the conventional 60% stocks and 40% bonds portfolio. Instead, they focus on building sophisticated, diversified portfolios tailored to the unique needs of each family.

Brett Barth [09:01]: "It's about building sophisticated portfolios wealthy clients were not taking advantage of in different ways."

Long-Term Compounding and Diversification

The firm emphasizes long-term compounding and views diversification as the only free lunch in investing. They allocate based on strategies rather than traditional asset classes, allowing for greater flexibility and opportunity.

Brett Barth [37:20]: "Long-term compounding, diversification, being contrarian thoughtfully, and opportunistic flexibility within our strategic plan are core to our approach."

Building Culture

Peace of Mind as North Star

BBR's foundational principle is to create peace of mind for their clients. This ethos permeates every aspect of the organization, from investment strategies to client interactions.

Evan Roth [11:31]: "Create peace of mind for wealthy families. That's your North Star, and you build the firm around that."

Team-Oriented Structure

Rejecting commission-based compensation, BBR fosters a team-centric environment where every role—be it client relationship management or investment decision-making—is valued equally.

Evan Roth [14:52]: "Everyone needs to row in the same direction. Put the team together where the whole is more than the sum of its parts."

Leadership and Transparency

Implementing transparent practices such as quarterly town halls, BBR ensures open communication and accountability within the firm.

Evan Roth [19:44]: "Our town halls are quarterly, involving everyone at the firm. We discuss what's gone right and wrong, fostering transparency."

Challenges and Growth

Adapting to Increased Competition

As BBR's model gained traction, more firms adopted similar high-touch, customized approaches. Initially perceiving this as increased competition, BBR later recognized it as validation of their effective strategies.

Brett Barth [14:21]: "Every time I heard about a new firm like us, I thought we were onto something. It meant people were doing what we were doing."

Operational Scalability

Early on, BBR grappled with scaling their highly customized services. Hiring a management coach in 2007 was pivotal in refining their operations, emphasizing accountability and responsibility.

Evan Roth [16:09]: "A consultant helped us realize we needed to automate and professionalize our processes to sustain growth."

Entry of Passive Partners

In 2010, BBR welcomed third-party passive partners from Lincoln Peak, which facilitated smoother transitions and reinforced the firm's commitment to long-term sustainability.

Brett Barth [24:37]: "Bringing in Lincoln Peak was crucial for our transition, emphasizing partnership and long-term structure."

Manager Selection and Investment Strategies

Rigorous Manager Selection Process

BBR Partners employs a meticulous manager selection process, focusing on people, incentives, specialization, and alignment with BBR's values. They prioritize trust and transparency, ensuring managers share straightforward reporting and are open about both successes and failures.

Brett Barth [43:26]: "We focus on people, incentives, specialization, and partnership. We value honesty and integrity in our managers."

Strategic Diversification

BBR categorizes investments into stable, lower-risk strategies and higher-return, higher-risk strategies. They allocate based on comprehensive strategies rather than traditional asset classes, allowing for a more nuanced and opportunistic investment approach.

Brett Barth [39:34]: "We allocate to strategies, not asset classes. This includes active and passive equities, long and short strategies, both private and public."

Adaptability and Opportunism

While maintaining a long-term strategic plan, BBR remains opportunistic, adjusting their tactical allocations based on current market conditions and emerging opportunities.

Brett Barth [40:15]: "Sizing is client-specific. We use a matrix approach to align clients' objectives with our investment strategies."

Responding to Market Changes

Navigating Turbulent Regimes

BBR has weathered various market downturns, including the dot-com crash, the 2008 financial crisis, and the COVID-19 pandemic. Their disciplined approach to rebalancing and staying the course has been crucial in maintaining client trust and portfolio performance.

Evan Roth [35:52]: "We're committed to rebalancing and staying the course, even during market downturns, to ensure long-term success."

Embracing Lower Returns in Traditional Sectors

Acknowledging that returns in areas like private equity and hedge funds are declining due to increased competition and capital influx, BBR adapts by seeking niche opportunities and less crowded investment spaces.

Brett Barth [51:13]: "Private equity returns will be lower over the next 25 years. We're focusing on smaller businesses where managers can add significant value."

Future Plans and Legacy

Sustaining Independence and Innovation

BBR plans to remain an independent boutique firm, emphasizing a culture of integrity, empathy, and rigor. They are investing in innovation, including AI and advanced systems, to stay ahead in the evolving financial landscape.

Evan Roth [59:16]: "We're committed to innovation and ensuring BBR lasts for generations, investing in long-term projects that enhance our capabilities."

Meritocratic Partnership Model

BBR fosters a meritocratic environment where ambitious and successful individuals can become partners, ensuring the firm's legacy and continuity without the pressures of external ownership.

Evan Roth [59:16]: "Ambitious, successful people become partners, owning real equity. This ensures the firm’s longevity beyond the founders."

Personal Insights and Reflections

Board Experiences and Governance

Both Brett and Evan share lessons from their board service, highlighting the importance of effective governance, diverse perspectives, and the ability to handle organizational challenges.

Brett Barth [65:55]: "Functioning well means having a great group around the table that brings diverse thought and expertise."

Work-Life Balance and Hobbies

Evan underscores the significance of maintaining personal interests and work-life balance, advocating for sabbaticals to ensure long-term professional success and personal well-being.

Evan Roth [69:57]: "Having time outside of business is crucial for success. We've implemented a sabbatical policy to ensure our team stays refreshed and engaged."

Unexpected Career Paths

Both co-founders reflect on how their careers diverged from initial expectations, emphasizing the value of embracing unexpected opportunities and challenges.

Brett Barth [73:21]: "I never wanted to be an entrepreneur, but starting BBR has been a pleasantly surprising and successful journey."

Conclusion

BBR Partners exemplifies a successful multifamily office that has navigated market volatility, industry changes, and internal growth with a steadfast commitment to client-centric values and innovative investment strategies. Brett Barth and Evan Roth's leadership emphasizes integrity, adaptability, and a long-term vision, ensuring BBR's continued prominence in the institutional investment landscape.

Brett Barth [29:06]: "We aim to be small enough to care, but big enough to matter. Maintaining a boutique mindset as we grow is essential."

Notable Quotes Summary:

• Evan Roth [08:59]: "Our mission is today. It's part of our culture. It's who we are."
• Brett Barth [09:01]: "We nailed that from the beginning. It worked well from a timing perspective because... we did really well."
• Evan Roth [14:52]: "Everyone needs to row in the same direction. The whole is more than the sum of its parts."
• Brett Barth [43:26]: "People tend to be honest and share bad news. That level of trust is crucial."

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