DAVID B. HORN wants to steer the super-wealthy away from the vicissitudes of the Dow Jones industrial average.
The highly respected private banker has formed a company, Graystone Partners L.P., to track and broker "alternative" investment strategies that are driven by factors other than the direction of U.S. equity and fixed-income bonds.
Strategies include buying securities of companies in bankruptcy, international investing, and short-selling. Using those strategies diversifies a portfolio by moving some investments away from a direct relationship to U.S. market measures. "This is a business whose time has come," said Mr. Horn, who was the architect of Northern Trust Co.'s Wealth Management Group for the superrich.
The strategies are so hot that Mr. Horn says he has been in-undated with calls from private banks looking to learn more about them and Chicago-based Graystone's services.
Already, he said, many affluent families have about 20% of their portfolios in alternative products. And he believes that slice will reach about 30% for most affluent families within two years.
The intense interest in international investments is fueling growth in all alternative strategies, he said.
"I would think it might represent an opportunity," said David Ross Palmer, a New York-based private banking consultant. "Particularly the segment of the marketplace he's been going after."
After leaving Northern last year, Mr. Horn worked briefly at Bessemer Trust Co. Along with several colleagues, he decided this spring that the time was ripe to form a new company.
While they are not new, many of the investment strategies have not been widely used by individuals. So Graystone plans spend ample time educating consumers, Mr. Horn said. "It's a niche we believe no one in the country has," he said.
The company will help clients identify appropriate managers and help them contract with those managers, Mr. Horn explained. Ultimately, the company may develop it own products to offer customers.
One of the first tasks of the new company was developing a system to track the best alternative money managers, Mr. Horn said. Out of more than 1,000 alternative money managers it identified, the company pays close attention to about 100, he said. Each month, the company analyzes the manager's performance in the main alternative management styles: short-telling, equities either long or short, international equities, hedge funds, distressed securities, multi-manager funds and relative value investments.
For now, the company has just seven employees including four principals: Mr. Horn; Charles S. Hopper, formerly a Bessemer senior vice president; Mark S. Ostroff, a former managing director and head of global wealth management for Bankers Trust Co.; and Louise M. Wasso, who had moved to Bessemer with Mr. Horn from a position at Northern Trust.
The Blackstone Group, a New York-based merchant bank, has a minority interest in the company.