In Money talk

By Clifton Barnes

Robert Borden has found that running a $2 billion investment company with 24 clients is just as rewarding — and a lot less headline-grabbing — than leading a $26 billion public pension fund with more than 300,000 participants.

Borden is chief investment officer of Chapel Hill-based Delegate Advisors LLC, which has doubled in assets since he joined the firm in 2012. The move followed an abrupt departure from his post as chief executive officer of the Columbia-based South Carolina Retirement System Investment Commission, where he attracted national publicity after shifting 40% of assets into alternative investments such as private equity and hedge funds from 2007-11. The resulting cascade of fees paid to Wall Street managers, topping $300 million annually, angered some South Carolina lawmakers who said returns didn’t justify the expenses.

Ready for a change, Borden packed up and moved 230 miles north. While he doesn’t miss the politics, handling money for wealthy families is a different role than representing retired schoolteachers and other state employees who relied heavily on the pension. “It always helped me when I was putting up with the political B.S. or the challenges of the markets to think there are hundreds of thousands of beneficiaries who are counting on me to do this for them.”

His new job working with high net worth families is equally motivating, he says. “Why don’t [small foundations and wealthy families] have access to the same thing that the $30 billion endowment has?” His 30 years of experience is enabling Delegate to offer access to investments typically reserved for larger institutions, particularly private equity and private debt funds, Borden says.

Delegate’s model is to have fewer clients but meaningful ones, he says. Its 10 professionals are split between Chapel Hill and San Francisco, with a Texas office being considered. While Borden works from North Carolina, President Andy Hart lives in northern California, where Silicon Valley executives made up the company’s initial client base. Hart previously worked for another Bay Area money-management company. “Our core is first-generation entrepreneurs,” he says. “That means they also have an appetite for private equity because they get it. They, themselves, are private-equity companies. They are serial entrepreneurs.”

Other clients live across the U.S., including Arizona, the Carolinas, Florida and Texas. They include department-store moguls, a hedge-fund manager and a livestock meat processor. Delegate recently added two foundations and is pursuing others.

Clients typically have assets from $15 million to $200 million, though Delegate takes on smaller investors if the entrepreneur is building a promising business or adds strategic value to the investment company. Clients pay a flat fee, so there’s no incentive to push proprietary products.

New clients have come exclusively from referrals by existing clients or friends. “There is a transfer of trust that occurs when an introduction is made by someone who is alongtime, trusted friend,” Borden says. Delegate wants to reach 50 to 100 clients, but adding them isn’t a quick process. “You don’t meet somebody, hit it off and the next day they give you their entire family fortune and say, ‘Run this for me,’” he says. “It takes a long time to build that trust.”

Interestingly, people change their wealth managers more often over losing trust rather than inadequate investment returns, he says. “As an investment guy who lives and dies with making returns versus benchmarks, that’s tough to say. But in the world of families, trust and responsiveness is more important.”

Borden, 53, grew up all over the world as the son of a fighter pilot who served in three wars. A graduate of the University of Texas, he worked in the investment divisions of that state’s treasurer, a workers’ compensation fund and an Austin-based bank before joining the Louisiana State Employees’ Retirement System as executive director and chief investment officer in 1995. He moved to South Carolina in 2006. At that time, the state’s funds were mostly invested in traditional stocks and bonds. While some criticized Borden’s strategy, South Carolina’s pension outperformed similar public funds during the three years ending Dec. 31, 2011, according to Wilshire Investment Services Inc. data. One reason: Fund managers bought distressed mortgages and debt that had collapsed during the 2007-09 recession. Since then, stocks and bonds have generally outperformed alternative investments.

Various South Carolina officials also disdained Borden’s style, which included driving a yellow Lamborghini, and his salary of $485,000, more than four times what the state’s governor earns. The car criticism was a cheap shot, Borden says. He got hooked on cars as a 14-year-old, helping his dad rebuild a vehicle, and his favorite hobby remains vintage sports car racing. By the time accusations about his lifestyle were flying, he’d sold the $70,000 Lambo and was driving a Ford truck.

As for the allegations of mismanagement, he feels vindicated since two former chairmen of the state investment commission are now Delegate clients. “It was uncomfortable, but [political pressure] wasn’t the reason I took this job — maybe 10% of the reason,” he says.

Borden, who is married to a technology project manager at a bank, has four children ranging in age from infant to 14. Far removed from Columbia’s political web, he likes North Carolina’s quality of life. “The future looks very bright here.”

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