The investment firm Cambridge Associates is systematically expanding its presence in continental Europe. „We will soon be opening an office in Milan,“ CEO David Druley announced in an interview with Börsen-Zeitung. With its first acquisition in its 50-year history—the purchase of Siglo Capital Advisors—the US company established a foothold in Zurich just a year ago.

Druley can imagine further acquisitions, provided they bring in either an outstanding team or a presence in a new market. This could be conceivable in France, for example, he says: „I am sure that we will seize good opportunities.“ Acquisitions are also possible in the US or Asia. The necessary capital is available.

Alexander Koriath, Head of Europe, who is also responsible for the Middle East region, is very satisfied with the expansion in Germany. Cambridge Associates used to serve its German clientele from London, but with the Brexit, the company wanted to secure its service with a branch in continental Europe. More than five years ago, Munich was chosen as the location. „We considered the German market to be interesting because there are not many independent institutional firms there that offer the services we provide.“

The implementation of this idea has worked very well, says Koriath. Cambridge started with three employees in its Munich office and now has 21: „We are continuing to grow.“ For Druley, this is no coincidence. As an investment manager, you have to have a local presence in order to truly understand the specific regulatory and market conditions of your clients. That's the only way to be competitive. US customs policy has further reinforced this necessity. A newly established strategy department at Cambridge Associates is therefore systematically examining expansion opportunities, including through acquisitions.

According to Druley, the company, which emerged from a financial advisory service for Harvard University in the US, has 13 offices worldwide. In total, it has around 600 billion dollars from institutional clients and family offices under its wing. The company still does the lion's share of its business in the US. Including Latin America and Canada, 80% of its business is in this region, with the remaining 20% divided between Europe and Asia.

Foundations account for 45% of the business, explains Druley. Another 35% comes from working with wealthy families—specifically, those with a minimum portfolio volume of 125 million dollars, he adds. These contacts were originally established through asset management for very wealthy families on the Harvard Board of Trustees. Druley notes: „We work with more billionaire families than any other wealth advisor in the world.“ The Jacob Rothschild family, for example, has been a client for decades.

The remaining 20% of Cambridge's business today consists of pension funds, insurance companies, and other institutions. Clients generally stay with the firm for a long time. Of 100 clients, an average of 96 remain each year, says Druley.

Both managers are very satisfied with Cambridge's growth. „We are growing steadily,“ reports Koriath: „Cambridge Associates is growing at an average rate in the mid to high single digits.“ The fastest-growing segment is clearly the family office business. Clients primarily commission Cambridge Associates to manage their entire portfolios. In addition, clients mainly issue mandates to monitor private equity, venture capital, or infrastructure portfolios.

The customer base in Europe is composed somewhat differently than globally. According to Druley, about half of the business here comes from family offices, with the other half coming from institutional clients. These clients are more interested in individual asset classes than in other regions.

Initially founded as a pure consulting firm, Cambridge Associates, with its 1,400 employees, now plays a key role in portfolio management for around 80% of its clients, according to Druley. Of these 80% of mandates, around 30 percentage points are managed on a fully discretionary basis. For the remaining 50% of mandates, Cambridge Associates prepares the portfolio structure and develops investment ideas, while clients retain the final decision or veto right over the portfolio composition.

According to Koriath, the average time horizon for capital investment is ten to twenty years. This also makes Cambridge Associates a highly sought-after partner for founder-led asset managers who want to arrange their succession and are looking for a strategic partner.

„Our long-term focus sets us apart from private equity investors, who typically expect another transaction after seven years,“ Koriath emphasizes. Cambridge Associates, with its extremely long-term perspective, also has a competitive advantage over large asset managers, where acquisitions are often accompanied by massive cost reductions.

„The core of our work is to find first-class investment managers across all asset classes,“ says Druley. The range extends from buyouts to private equity and venture capital to infrastructure investments: „We cover almost every asset class you can imagine.“

The company has nearly 300 senior investment professionals. Every investment idea goes through a fixed review process: „We hold between 4,000 and 6,000 meetings with investment managers each year, but only a very small proportion of them—about 2 to 3%—actually receive client funds.“ Cambridge Associates is not a „fund of funds“ provider, but works as an investment advisor in the form of separate, tailor-made mandates.

In a competitive market, you need to have some unique selling points. A large proportion of new capital is currently flowing into large-volume buyouts. There is too much capital competing for the same deals in this area: „We therefore believe that the really attractive opportunities lie in the small and mid-cap sector.“ Above-average returns can be achieved here.

Druley is relaxed about the current wave of consolidation in the industry. „We want to remain independent,“ he emphasizes. Nearly 70% of Cambridge Associates is owned by external shareholders, who are also clients. Nearly 20% is held by one of the founders, who is thus the second-largest shareholder. The rest is distributed among around 65 active partners and a handful of former managers.

Many of the current acquisitions in the industry are related to scaling. However, Cambridge Associates already has the necessary size. Smaller boutique competitors hardly have the resources to invest in technology or operate globally. Many of the former competitors in the ultra-high-net-worth segment have been acquired by large asset management platforms that tend to operate in the middle asset segment, thus eliminating them as competitors.

The management duo does not want to commit to whether Cambridge Associates could work not only for asset owners in the future, but also as a supplier of white-label solutions for other investment firms. Cooperation with banks or intermediaries would be a strategic new development, according to Druley: „So far, we have decided against it.“

Cambridge Associates is currently investing millions in platforms for more detailed data analysis. According to the company, it has a unique treasure trove of data, some of which dates back 50 years, particularly in the area of private investments. „Our goal is to collect data more frequently and process it more quickly in the future so that we can pass it on to our clients in a more timely manner.“ Cambridge recently formed a consortium with S&P and Mercer to consolidate the data sets in anonymized form.

From Koriath's perspective, one interesting question for data analysis is, for example: „Why does private equity perform better than other investment products in terms of returns?“ Is this solely because it is purchased at a low multiple and then sold at a higher multiple, or is there genuine operational value creation?

According to Druley, US clients also remained committed to ESG. In some US states, it is difficult for public pension funds to take sustainability aspects into account when investing. However, many private clients continue to do so: „They may be less vocal than they used to be, but they are acting in accordance with ESG criteria.“ In Europe, ESG is standard practice anyway, where environmental and governance aspects are a must for every client.