Brendan MacMillan is chief investment officer at Akkad Capital Partners, a single-family office based in New York. In this interview, MacMillan discusses why risk management is the integral component to family office investing and how family offices pioneer new strategies that are later adopted by other institution types.
Prior to joining Akkad, he worked with some of the industry’s brightest minds at Ocean Road Advisors, a single-family office; Legatum Capital; Oceanwood Capital Managament, Owl Creek Asset Management and Clarium Capital Management.
MacMillan was recently named as one of Trusted Insight’s 2017 Top 30 Family Office Chief Investment Officers. He graciously spoke with Trusted Insight on Oct. 27, 2017. The following interview has been edited and condensed for clarity.
Trusted Insight: You come from a diverse background. How have your previous experiences informed your approach at Akkad?
Brendan MacMillan: My background has been broadly in alternatives, having done quite a bit in private equity and hedge funds. My focus has been to continuously learn and become the best investor I can be. Seeking out people who were considered to be experts or at the top in their strategies has really been my guiding light through my career and how I continue to learn and mature as an investor myself. The only thing I know after 20 years is that there's still a lot for me to learn because I look back every few years and realize how little I knew.
It's been tremendous to have had the opportunity to work with a few of the greatest investors in the world, from people like Peter Thiel to Jeff Altman at Owl Creek to Chris Gate at Oceanwood.
I did a number of different things at all those places. I worked across capital structures, across geographies, across asset classes and across sectors. Every place that I've worked at has built a foundational piece of my investment perspective and helped refine my personal investment philosophy, which I've adapted to the family office world.
Throughout my career I've continued to seek the best and the brightest because I've wanted to learn from their various perspectives, which I think is one of the things that makes me somewhat unique in this industry where I've worked for a good many people, from different backgrounds, with different strategy focuses. And that's where it provided me a much more holistic view of markets, asset allocation, risk management and specific direct investment capability.
Trusted Insight: Do you recognize the markets that we're in today? If not, how are you positioning the portfolio when there is little historical precedent to follow?
Brendan MacMillan: There are two ways to look at it. There's the view of formal business and market cycles that undulate slowly over time. But there's also the context of the rapidly changing market structure, especially on the public market side for not just equities, but also bonds, options and derivatives, largely due to the growth in passive investing and ETFs, which have an enormous number of ramifications.
To me, it speaks toward CIOs from any type of institution being much more cognizant of that market structure, how it can change valuations much more quickly than has historically been the case, for better or worse. It puts a much stronger emphasis on CIOs having deep risk management backgrounds, both in terms of understanding how to reduce risk and, probably as important, generally when to reduce risk.
Now no one can time the market, but people can make smart moves to reduce risk at appropriate times. That's a very, very different skill set than many people who've grown up as either just a manager selector or just an investor in stocks or bonds. It's very much a portfolio manager perspective and one where I've been fortunate to work with some people who maybe weren't the best stock selectors, but were just unbelievable risk managers.
Oceanwood was the Tudor spin out I worked at, and Tudor has what I consider a world-class risk management team that really understands and looks at risk in many different ways and how to offset it. That's been a great lesson for me. In the context of the current market environment and market structure, while the world looks to be doing well right now, it can change relatively rapidly over the length of our careers. In this current market structure, risk can grow substantially and maybe even more so than in previous similar periods once we get into the next market downturn, whenever that may be.
Trusted Insight: You’ve been at multiple family offices. How is the family office chief investment officer role evolving over time?
Brendan MacMillan: Family offices tend to be the leader institutions. They have a much more flexible mindset and a much larger investible universe, simply because the families are the ultimate benefactors of the capital and while there might be some politics within families, the decision making is generally much more straightforward.
The role of family office CIOs is rapidly evolving. This is really being driven by the fact that families, by both market forces and by return opportunities, are gradually shifting their focus away from simply allocating or manager selection to focus on direct investments. Partially that is an education process among families, as their thinking evolves as a group and as that permeates more and more families. Really, they're asking themselves why are they doing certain things and how they can do them better to meet their objectives?
While directs have been a source for lowering fees, which family offices are generally always in favor of, I see the forces now being driven by return opportunities and also to focus on investments that are less competitive and strategies that play to their strength.
Families have a tremendous advantage in the private markets, simply because they have greater flexibility and can look at a lot of different structures. Whether that's seeding other managers or seeding strategies, then bringing their own people in to invest in a certain strategy. Or dealing with owner-operators of businesses. While many owners just want the highest prices possible for their companies and they tend to sell to private equity, which is fine, many others want to continue owning and operating their businesses, while still gaining some liquidity. These owners see their company as a business that should be in their own family for generations to come. So, they want to partner with other families with a similar perspective and who also understand the challenges substantial families face.
I see the private markets being a much more progressive way for families to invest their capital because that's where their strengths are, and I think that's part of what's going on in a family office world where CIOs used to be much more from a manager selection background, and have really started to migrate to have much greater capabilities to invest directly.
First and foremost, the role of a family office CIO is to be able to effectively communicate with the families and all the family members, and really be in a position to determine their dynamic, ever-changing needs and objectives, both financial and otherwise, and be able to translate that into a holistic asset allocation framework, which is supported by actual investments, whether those be funds or securities of some sort.
It's a real blend of being a generalist across investment strategies, being a direct investor, being a manager selector, being an asset allocator and being a great risk manager. And you know, it's that diversity of demands on family office CIOs nowadays that make this job so damn fun.
There are few places you could go in this world where you can be as unconstrained as that and be expected to be somewhat of an expert in all those areas to be truly successful.
Fortunately for me, there's some strong capabilities that are derived from being in a family office seat for many years, and I've been lucky to have been guided by and learned from many of the top investors who prepared me for this role, which evermore is evolving into being a generalist expert across many different investment disciplines and pretty much every single investment strategy one can name on the Earth. That diversity is fun, and I love the challenge of that.
Trusted Insight: There's a cliché: if you've seen one family office, you've seen one family office. What's unique about Akkad that is dissimilar to other family offices?
Brendan MacMillan: We're probably much more focused on directs and privates than many others. Although I say that and I can probably rattle off a dozen other families off the top of my head that are like us.
We have a real focus on what we know, and we love growing industries such as health care or industries going under rapid change, like technology. Many of these industries are all converging upon each other.
There are always many very interesting strategies to pursue. Akkad likes to believe that we are at the forefront of trying to find great investments and ways to do them in a collaborative approach. And you know, we and I personally think there's much to learn from others. That's where we are a little bit more unique.
We go into every situation wanting partners, and I think that's a reflection of the family and a reflection of me to a great extent as well. Other places, because they are so private, they don't want to partner with anyone. Or, "Hey, I got a good idea. Why should I share part of it with anyone else?" And you know, there's definitely that perspective out there. These insular family offices don't see it that way or feel like there's much to gain from others.
Many years ago, I was at a family office that was very insular. While they did extremely well, there's many ways to skin a cat in this business and frankly it's just more fun to work with others. It gets a little more complicated, but there's a lot of benefit to that complication and learning from others’ perspectives and knowledge.
Trusted Insight: Any final thoughts?
Brendan MacMillan: I love to be an investor, and I'm privileged to have worked with the people I've worked with and have the roles that I've had in my career. I look at it as another 20 years ahead of me and every day I want to keep getting better. That's who I am as a person and as an investor. I love to learn from others. I love to apply what I learn to what I do on a daily basis.
You can view our full library of Q&As here.
Prior to joining Akkad, he worked with some of the industry’s brightest minds at Ocean Road Advisors, a single-family office; Legatum Capital; Oceanwood Capital Managament, Owl Creek Asset Management and Clarium Capital Management.
MacMillan was recently named as one of Trusted Insight’s 2017 Top 30 Family Office Chief Investment Officers. He graciously spoke with Trusted Insight on Oct. 27, 2017. The following interview has been edited and condensed for clarity.
Trusted Insight: You come from a diverse background. How have your previous experiences informed your approach at Akkad?
Brendan MacMillan: My background has been broadly in alternatives, having done quite a bit in private equity and hedge funds. My focus has been to continuously learn and become the best investor I can be. Seeking out people who were considered to be experts or at the top in their strategies has really been my guiding light through my career and how I continue to learn and mature as an investor myself. The only thing I know after 20 years is that there's still a lot for me to learn because I look back every few years and realize how little I knew.
It's been tremendous to have had the opportunity to work with a few of the greatest investors in the world, from people like Peter Thiel to Jeff Altman at Owl Creek to Chris Gate at Oceanwood.
I did a number of different things at all those places. I worked across capital structures, across geographies, across asset classes and across sectors. Every place that I've worked at has built a foundational piece of my investment perspective and helped refine my personal investment philosophy, which I've adapted to the family office world.
Throughout my career I've continued to seek the best and the brightest because I've wanted to learn from their various perspectives, which I think is one of the things that makes me somewhat unique in this industry where I've worked for a good many people, from different backgrounds, with different strategy focuses. And that's where it provided me a much more holistic view of markets, asset allocation, risk management and specific direct investment capability.
Trusted Insight: Do you recognize the markets that we're in today? If not, how are you positioning the portfolio when there is little historical precedent to follow?
Brendan MacMillan: There are two ways to look at it. There's the view of formal business and market cycles that undulate slowly over time. But there's also the context of the rapidly changing market structure, especially on the public market side for not just equities, but also bonds, options and derivatives, largely due to the growth in passive investing and ETFs, which have an enormous number of ramifications.
To me, it speaks toward CIOs from any type of institution being much more cognizant of that market structure, how it can change valuations much more quickly than has historically been the case, for better or worse. It puts a much stronger emphasis on CIOs having deep risk management backgrounds, both in terms of understanding how to reduce risk and, probably as important, generally when to reduce risk.
"Family offices tend to be the leader institutions."
Now no one can time the market, but people can make smart moves to reduce risk at appropriate times. That's a very, very different skill set than many people who've grown up as either just a manager selector or just an investor in stocks or bonds. It's very much a portfolio manager perspective and one where I've been fortunate to work with some people who maybe weren't the best stock selectors, but were just unbelievable risk managers.
Oceanwood was the Tudor spin out I worked at, and Tudor has what I consider a world-class risk management team that really understands and looks at risk in many different ways and how to offset it. That's been a great lesson for me. In the context of the current market environment and market structure, while the world looks to be doing well right now, it can change relatively rapidly over the length of our careers. In this current market structure, risk can grow substantially and maybe even more so than in previous similar periods once we get into the next market downturn, whenever that may be.
Trusted Insight: You’ve been at multiple family offices. How is the family office chief investment officer role evolving over time?
Brendan MacMillan: Family offices tend to be the leader institutions. They have a much more flexible mindset and a much larger investible universe, simply because the families are the ultimate benefactors of the capital and while there might be some politics within families, the decision making is generally much more straightforward.
The role of family office CIOs is rapidly evolving. This is really being driven by the fact that families, by both market forces and by return opportunities, are gradually shifting their focus away from simply allocating or manager selection to focus on direct investments. Partially that is an education process among families, as their thinking evolves as a group and as that permeates more and more families. Really, they're asking themselves why are they doing certain things and how they can do them better to meet their objectives?
While directs have been a source for lowering fees, which family offices are generally always in favor of, I see the forces now being driven by return opportunities and also to focus on investments that are less competitive and strategies that play to their strength.
Families have a tremendous advantage in the private markets, simply because they have greater flexibility and can look at a lot of different structures. Whether that's seeding other managers or seeding strategies, then bringing their own people in to invest in a certain strategy. Or dealing with owner-operators of businesses. While many owners just want the highest prices possible for their companies and they tend to sell to private equity, which is fine, many others want to continue owning and operating their businesses, while still gaining some liquidity. These owners see their company as a business that should be in their own family for generations to come. So, they want to partner with other families with a similar perspective and who also understand the challenges substantial families face.
"And you know, it's that diversity of demands on family office CIOs nowadays that make this job so damn fun."
I see the private markets being a much more progressive way for families to invest their capital because that's where their strengths are, and I think that's part of what's going on in a family office world where CIOs used to be much more from a manager selection background, and have really started to migrate to have much greater capabilities to invest directly.
First and foremost, the role of a family office CIO is to be able to effectively communicate with the families and all the family members, and really be in a position to determine their dynamic, ever-changing needs and objectives, both financial and otherwise, and be able to translate that into a holistic asset allocation framework, which is supported by actual investments, whether those be funds or securities of some sort.
It's a real blend of being a generalist across investment strategies, being a direct investor, being a manager selector, being an asset allocator and being a great risk manager. And you know, it's that diversity of demands on family office CIOs nowadays that make this job so damn fun.
There are few places you could go in this world where you can be as unconstrained as that and be expected to be somewhat of an expert in all those areas to be truly successful.
Fortunately for me, there's some strong capabilities that are derived from being in a family office seat for many years, and I've been lucky to have been guided by and learned from many of the top investors who prepared me for this role, which evermore is evolving into being a generalist expert across many different investment disciplines and pretty much every single investment strategy one can name on the Earth. That diversity is fun, and I love the challenge of that.
Trusted Insight: There's a cliché: if you've seen one family office, you've seen one family office. What's unique about Akkad that is dissimilar to other family offices?
Brendan MacMillan: We're probably much more focused on directs and privates than many others. Although I say that and I can probably rattle off a dozen other families off the top of my head that are like us.
We have a real focus on what we know, and we love growing industries such as health care or industries going under rapid change, like technology. Many of these industries are all converging upon each other.
"I look at it as another 20 years ahead of me and every day I want to keep getting better."
There are always many very interesting strategies to pursue. Akkad likes to believe that we are at the forefront of trying to find great investments and ways to do them in a collaborative approach. And you know, we and I personally think there's much to learn from others. That's where we are a little bit more unique.
We go into every situation wanting partners, and I think that's a reflection of the family and a reflection of me to a great extent as well. Other places, because they are so private, they don't want to partner with anyone. Or, "Hey, I got a good idea. Why should I share part of it with anyone else?" And you know, there's definitely that perspective out there. These insular family offices don't see it that way or feel like there's much to gain from others.
Many years ago, I was at a family office that was very insular. While they did extremely well, there's many ways to skin a cat in this business and frankly it's just more fun to work with others. It gets a little more complicated, but there's a lot of benefit to that complication and learning from others’ perspectives and knowledge.
Trusted Insight: Any final thoughts?
Brendan MacMillan: I love to be an investor, and I'm privileged to have worked with the people I've worked with and have the roles that I've had in my career. I look at it as another 20 years ahead of me and every day I want to keep getting better. That's who I am as a person and as an investor. I love to learn from others. I love to apply what I learn to what I do on a daily basis.
You can view our full library of Q&As here.