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Robert Borden, Delegate Advisors
Chapel Hill and San Francisco-based company looks for meaningful clients rather than just more

By Clifton Barnes

(Note: A shorter version is available at Business North Carolina by clicking here.)

Despite being only five years old and despite having just 24 clients, Delegate Advisors LLC of Chapel Hill is among the state’s largest investment advisors, overseeing nearly $2 billion.
“Our model is to have fewer clients but meaningful ones,” said the firm’s partner and chief investment officer Robert Borden, who previously ran a $30 billion public pension plan for more than 320,000 participants. “We manage money for very wealthy families across the country and we deliver an exceedingly high degree of customer service.”

BellTower.Robert Borden (courtesy of Delegate Advisors)
Delegate Advisors, which opened in 2012 with 14 clients and their $900 million of assets, now has 10 professionals split between Chapel Hill and San Francisco, with preliminary plans to expand to Texas.
“Our growth has been largely organic,” said Borden, who shares the company’s top billing with firm president Andy Hart of the San Francisco office. “There is no hidden secret. Delegate's independence and investment expertise has been a strong selling point and differentiator for us and is a primary driver of our growth.”
The growth from existing clients primarily comes from adding on new entities or additional family members or from the clients earning additional wealth, he said.
While nearly all firms tout their customer service, Delegate relies on it for expanding to new clients.
“We go and see our clients,” Borden said. “We have nice offices but I don’t think a client or prospect has ever set foot in one of our offices.”
Borden said that every single new client has come from a referral of an existing client or a friend of the firm. “That’s the way these decisions are made,” he said. “There is a transfer of trust that occurs when an introduction is made by someone who is a longtime trusted friend.”
Most of the new growth over the last couple of years has been from clients referring Delegate to other families while some has come from referrals from other service providers such as tax advisors and estate planning attorneys.
But getting the new client is still a long sales cycle. “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,’” Borden said. “It is a relationship built on trust and it takes a long time to build that trust.”
Borden said the No. 1 reason people change their wealth management advisor is the loss of trust with the No. 2 reason being lack of responsiveness. “The actual investment results aren’t as important,” Borden said, nearly choking on the words. “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 said the members of the firm are obsessed with getting the best risk-adjusted returns they can. “But we realize that it’s not enough. We have to be very responsive,” he said.
During the process of getting new clients, Delegate makes sure they understand the firm isn’t a brokerage firm to which they may be accustomed. “Such firms have inherent conflicts as they tend to sell their clients proprietary investment funds in which they earn significant additional fees or trade in separate accounts in which they earn commission in addition to their client advisory fees. We do not,” Borden said adding that, unlike his firm, brokers are unable to underwrite specific private placements that are not part of their architecture.
“We only make money one way – one flat fee from our clients,” Borden said. “We are not incented to move them into product A or product B. We are not incented to try to get them to other products to which we make ancillary income. We don’t need to push them up and down the risk curve to increase fee revenue because we get paid the same.”
Borden said Delegate also has access to alternative investment strategies such as private and distressed debt, private equity and other special situations.
While the wealth management industry probably started in the Northeast with fourth or fifth generation “old money wealth,” Delegate Advisors’ start came from Silicon Valley entrepreneurs. “Now most of the people who are our clients are active in business and entrepreneurial business,” Borden said. “Our core is first-generation entrepreneurs. That means they also have an appetite for private equity because they get it. They, themselves, are private equity companies. They are serial entrepreneurs.”
While the client base is private, Borden said there are clients from San Francisco to New York with stops in Arizona, Omaha, Texas, Florida, the Carolinas and Chicago. They include department store moguls, a hedge fund manager and a livestock meat processor.
Borden said ideal clients have assets ranging from $15 million to $200 million but exceptions are made if the firm believes an entrepreneur is building a business that will be worth much more in the future or if the potential client brings strategic value to the firm as good counsel or a referral base.
Recently, Delegate has focused on adding small foundations and endowments to its client base. “We didn’t want to try to compete too much (in that arena) until we were in business five years,” Borden said. “Folks want to see that the firm has been in business and that it’s profitable.”
So far, Delegate has added two foundations with two more actively being pursued.
“For the, say, $50 million hospital foundation with a board of surgeons and doctors, they don’t have time to deal with it,” Borden said. “Board members have a fiduciary risk in getting involved. But they can’t really have the hospital administrator doing this.”
He said the foundation or endowment could hire a good investment person on staff but that’s going to cost a good bit of money. “It’s way more cost effective to hire someone like us who gives them a policy, comes to their board meetings every quarter and keeps them informed,” he said.
Borden said that the prospect of working with small foundations and high-net worth families drew him to Delegate Advisors.
When Borden was contacted by a recruiter, Delegate Advisors already had investors, the president, the chief financial officer, the head of marketing, the head of advisory and clients willing to come on day one. “The last piece of the puzzle was the chief investment officer and they wanted someone with big-time experience,” he said.
“I felt that these small foundations and these families are disadvantaged,” Borden added. “Why don’t they have access to the same thing that the $30 billion endowment has? Can I bring this 30 years of experience and connectivity to this solution?”
Borden, who grew up all over the world as the son of a fighter pilot, ended up in Austin, Texas in his teens where he went to the University of Texas. His work experience actually spans more than 30 years if you count the time he ran a small property management company while still in business school.
After graduation, he worked with the Texas State Treasury for a couple of years in the bond division before moving to Franklin Federal Bancorp for six years, starting in 1986.
During this time, Savings & Loans that had engaged in speculative land lending collapsed. “It was a fabulous education for me right out of the gate,” Borden said. “I had a front row seat to the massive transference of wealth.”
From his experience, Borden found that when things are collapsing, money can be made. “I learned that in times of crisis, when the building is on fire and people are jumping from the windows and running and screaming from the exits, if you can calmly and coolly walk in the front door and write a check, you can be the recipient of some outsized returns,” he said.
It also afforded Borden the opportunity to be promoted quite rapidly. He went from being the youngest officer to the youngest assistant vice president to the youngest vice president and finally to senior president.
In 1992, he became the first treasurer of Texas Mutual which is the state’s leading provider of workers' compensation insurance. He got there at a time that afforded him valuable experience. The Texas legislature tightened slip-and-fall laws, which created more business and more need for insurance.
“There was this tremendous pent-up demand for good affordable business insurance,” Borden said. “That was one of the roles Texas Mutual filled, so we had explosive growth.”
Borden was the 12th employee hired and fewer than three years later Texas Mutual had nearly 3,000 employees. “We were growing at several hundred million dollars a month,” he said. “We had picnic tables piled with resumes. We couldn’t hire people fast enough.”
Once again, he had an opportunity. He was able to build a multi-billion dollar investment platform from scratch and to see a company skyrocket because it – and he – was in the right place at the right time.
From 1995 to 2006, Borden was the executive director and chief investment officer of the $7 billion Louisiana State Employees Retirement System (LASERS). He arrived on the heels of a mortgage derivative crisis for the state’s pension system.
“It was a disaster but it was an opportunity,” he said. “I knew if you come into a disaster, there is an incredible opportunity to rebuild systematically.”
Without the salaries to hire top-flight investment officers, he started an intern program with Louisiana State University. While they were paid, the real benefit for interns came from class credit, tuition reimbursements, further training and development, and placement after graduation – sometimes to Wall Street and sometimes to full-time employment with LASERS.
More than a decade after leaving that position, nearly 90 percent of the staff there today are former interns, Borden said. In addition, the CIOs of three big funds in Louisiana are all former entry level staffers from the intern program.
Borden has continued the intern program at Delegate with two, what he calls, “superstars” now on the full-time staff after graduating from Duke and North Carolina.
Right before coming to Delegate, Borden also continued that program as chief executive officer and chief investment officer of the $30 billion South Carolina Retirement System Investment Commission, where he served for five years.
“I really didn’t want to go do another public job,” Borden said. “I wanted to do something in the asset management world but this was just too interesting to pass up.”
The South Carolina pension fund, set up during World War II, had its money invested in government securities.
“Imagine how much return they gave up during the decades of the ‘80s and ‘90s by not being in the stock market,” he said. “That should have been a $60 billion pension fund.”
In 2005, a new board was formed, made up of investment people who hired Borden. “They said, ‘here’s $30 billion – create us a cutting-edge endowment-style portfolio.”
Borden restructured and diversified South Carolina’s public pension fund, in part, by creating strategic partnerships with private equity, private debt firms doing co-investments, direct investments, operating companies, and distressed investing.
When the subprime mortgage crisis occurred in 2007, the pension fund did not own any of the mortgages but Borden, remembering the lessons of opportunity from the past, actively started circling capital to buy.
“I thought, this is going to come crashing down and those who can walk in calmly and coolly and write a check are going to clean up,” he said. “In the fall of ‘08, we said the entire world is on sale. Debt is as cheap as equity but it is higher in the capital structure – it has the first claim on the assets - so why not buy debt in all of its forms now? That’s what we started doing – high yield bonds, distressed mortgages, non-performing loans.”
Borden said, as a result, the South Carolina pension fund “cleaned up” doing that.
His time in South Carolina, however, ended in controversy as South Carolina’s state treasurer criticized the South Carolina pension fund for spending millions to “enrich” Wall Street hedge fund managers and private equity dealers.
Borden was characterized as a flashy, highly paid public servant who drove a bright yellow Lamborghini around town and was only looking out for himself.
But Borden, whose hobby is vintage sports car racing, said he had actually already sold his used Lamborghini, worth $70,000, by the time the accusations started flying… and he was driving a Ford pick-up truck.
Borden said those who were critical wouldn’t sit down to understand how the investments were done. At the time Borden left for Delegate Advisors, onerous open records requests of the pension’s staff were filed in an effort to find corruption, Borden said.
“It was uncomfortable but it wasn’t the reason I took this job – maybe 10 percent of the reason,” Borden said.
After Borden left, the remainder of the board publicly censored the treasurer while the inspector general, though he made recommendations, found that the charges were either baseless or without merit, he said.
Borden said he feels vindicated, not only because of that but because the treasurer was convicted of an ethics violation and later was removed from the board by the South Carolina legislature.
“Also, two of the former chairmen of the Commission are now clients of Delegate,” Borden said refusing to name them. “If this treasurer was right about anything, do you think these guys would give me their family assets to manage?”
Borden said it is nice to not have to deal with politics now but he misses doing good for retirees like the old former school teacher whose living expenses were paid 100 percent by her pension check. “It always helped me when I was putting up with the political B.S. or the challenges of the markets,” he said, “to think there are hundreds of thousands of beneficiaries who are counting on me to do this for them.”
But Borden said now he is excited about the future of Delegate Advisors. “We’ll absolutely be hiring more people this year,” he said. “Our plan is to organically grow with the client base. We’d like to have 50 to 100 clients and we’d grow commensurately with that.”
And he said Delegate Advisors figures to be around a long time. With partners in their 50s and partners in their 30s, when a senior partner wants to retire, instead of having to sell the firm, equity will be sold off to the younger partners over 10 years.
“So, the firm sells itself one person at a time back to the other partners and we’ll be evergreen,” he said adding that they’d like to build their presence in the Carolinas.
Borden, who is married to a technology project manager at a bank, has four children ages 14 years to less than a year old and they like the quality of life in North Carolina and within the firm.
“The future looks very bright here.