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Exclusive Q&A: Prateek Mehrotra, CIO Of Endowment Wealth Management, A Multi-Family Office

by trusted insight posted 4years ago 9179 views

As a co-founder and chief investment officer of Endowment Wealth Management, Prateek Mehrotra is responsible for sourcing, analyzing, recommending, monitoring and reporting on both alternative and traditional investments. He manages relationships with high net worth clients, institutional investors and traditional/alternative asset money management firms. Born and raised in India, Mr. Mehrortra received his Bachelor’s degree in Technology from the Indian Institute of Technology in Kanpur and subsequently his MBA in Finance from Lehigh University in Bethlehem, Pennsylvania. Previously, Mr. Mehrotra spent ten years as CIO and Investment Committee Member with Sumnicht & Associates and iSectors.

Mr. Mehrortra was recently named on Trusted Insight’s ranked list of The Top 30 Family Office Investors In Venture Capital. He graciously spoke with Trusted Insight on October 15. The following interview has been edited and condensed.

Trusted Insight: How did you get your start in this business?

Prateek Mehrotra: I’ve been in the business for 20+ years and have lived on three countries – India, Saudi Arabia and now the United States. I started on the sell side, now I’m on the buy side. I’ve been involved in all asset classes, the full spectrum.

In February 2013, we [co-founders Robert Riedl, Thomas Remley] started Endowment Wealth Management and its sister company, ETF Model Solutions. I came here from another local multi-family office and Registered Investment Advisor. Prior to moving to Appleton, I lived in Silicon Valley, working at a late-stage, pre-IPO, venture capital fund as a principal, GTG Ventures. Before that I was at Rana Investment Company in Riyadh, Saudi Arabia a multi-family office.

Trusted Insight: After Southeast Asia, the Middle East and Silicon Valley, Wisconsin sounds a little boring…

Prateek Mehrotra: When you have two young kids and are trying to raise a family, it’s a great place from a safety and cost of living point of view. Moreover, you get to enjoy all four seasons and get to root for the best football team on the planet. It is a wonderful family-oriented community that is now my second home. What’s not to like?

Trusted Insight: Can you tell us a little bit about the two companies you co-founded?

Prateek Mehrotra: Endowment Wealth Management is structured as a multi-family office and provides high net worth clients with a high touch and personalized service. Our goal is to provide professional wealth management services that will sustain multi-generational family wealth, unity and legacy.

Our sister company, ETF Model Solutions is a third-party ETF strategist, offering five core models using exchange-traded funds so investors and advisors can use to create their own bespoke endowment style allocations. These solutions are low-cost, provider agnostic and designed to deliver superior risk-adjusted returns.  

We’re two-and-a-half years young and have hit multiple milestones along the way including an “Endowment Index” with Nasdaq as our calculation partner, an Endowment Collective Investment Fund and a soon-to-be launched MyRoboAdviser.com.

Trusted Insight: Can you elaborate on ETF Model Solutions?

Prateek Mehrotra: We use a core-satellite portfolio construction methodology, where we have five core models. We like to think of them as our lego building blocks. Also, since we are based in Wisconsin, we like to use a football analogy to explain our asset allocation framework. Our foundational building blocks are alternative investments for risk management, which include private equity, hedge funds and real assets. We refer to them as our special teams. Our global equity model is our growth allocation, which we call our offense and our global fixed-income model is our defense. We primarily use fully liquid exchange-traded funds to build our core models. We provide investors the tools to build a liquid endowment allocation.

Trusted Insight: Do the two businesses complement each other?

Prateek Mehrotra: There’s a lot of overlap in terms of employees. On the family office side, we use the ETF Model Solutions’ core models to reduce costs by about 50% as compared to mutual funds, separately managed accounts, etc. As a matter of fact, our hedge fund of funds model is fully liquid and reduces costs almost 75% as compared to a traditional hedge fund of funds. However, the two businesses are distinct as one is a multi-family office practice and the other a third party ETF strategist.

Trusted Insight: How did you go about starting these businesses?

Prateek Mehrotra: Having lived and worked in Silicon Valley, the entrepreneurial bug finally bit hard, encouraging me and my partner Rob Riedl to start this business. We raised sufficient venture capital by selling a piece of our equity to multiple families, who are all prospective family office clients. We are unique in that the family office clients get to own a piece of equity in their family office. As you can imagine, starting a family office can be prohibitively expensive, upward of a $1 million in annual costs. Hence, we invited founding families to invest in our business so they can think of it as their own. We are the first multi-family office owned by these key founding families.

Trusted Insight: What are the satisfactions of working in family office investing?

Prateek Mehrotra: Working for families that create wealth is a great experience because it keeps you close to the patriarch and/or matriarch that created the wealth. It is not just about managing the money, but about preserving and enhancing the family values that helped them create the wealth in the first place. It is about making sure that the values are transferred to the next generation before the money is, to make sure that the wealth lasts beyond multiple generations.

Trusted Insight: How do you do that, transfer values?

Prateek Mehrotra: Obviously the patriarch or matriarch worked really hard. That involves a core set of values including integrity and hard work for them to get to the point where they’re able to monetize their values. Now, imagine you’ve been born into that family with a silver spoon in your mouth. You’ve always seen wealth. How do your values evolve? Each family is a little different, but basically the same values are involved in creating wealth. We want these kids to know that money comes with a lot of responsibility. We soft pedal the message, bringing it up in multiple conversations. We also work with a psychologist who helps with the educational process so the next generation does not catch “affluenza."

Trusted Insight: Tell me a little about your clients.

Prateek Mehrotra: We’re a young company, so we’ve got the core group of founding families I mentioned that are equity holders and another dozen or so families that are all family office clients. Generally, we look for families with between $5-to-$50 million net worth who do not want to start their own family office. We also have  a lot of smaller families where we bring the same family office type expertise to help organize their lives. We’re slowly trying to get into the 401K space and looking for advisors who might want to use our Endowment Collective Fund. We’re looking for that first endowment or foundation to work with as an outsourced CIO. Our goal is to popularize our Endowment Index as an objective three dimensional benchmark that can be used by both individual and institutional clients.

Trusted Insight: Tell me a little about your investment strategy.

Prateek Mehrotra: We implement the Endowment Investment Philosophy through a three-dimensional asset allocation that expands the traditional stock-bond two-dimensional portfolios by adding liquid alternative investments. These alternative investments include private equity, hedge funds and real assets. Everyone we work with gets the opportunity to invest like an endowment through an index we’ve created with 19 sub-asset classes. Now investors with only $1,000 can invest like the Yale and/or Harvard Endowments.

Trusted Insight: What is the biggest challenge to family office investing, as opposed to other types of investing?

Prateek Mehrotra: Family Offices have to deal with the quirks and nuances of any special conditions imposed by the families. Moreover, some Family Offices have to handle investments across disparate asset classes like private equity, hedge funds and real assets like art, international properties, stamps, wine, etc.

Trusted Insight: Have you done much investing in real assets?

Prateek Mehrotra: We haven’t delved into the real asset space outside of REITs, MLPs, Infrastructure, Commodities, etc. I can’t tell you I’m an expert in antique cars or fine wines as we haven’t touched the esoteric yet. The closest we’ve come is gold, that “barbarous relic,” to use John Maynard Keynes’ phrase. By the way, we treat gold with a lot of respect. It’s a great asset over the long-term, a great inflation and/or crisis hedge.

Trusted Insight: How do you define success?

Prateek Mehrotra: As a first generation immigrant my dream was to launch my own business and have it be successful. Now I’d like to expand the footprint regionally, nationally and globally -once its global, that’s how I’ll define success.

To learn more about the top family office investors in venture capital, check out Trusted Insight's list of Top 30 Family Office Investors In Venture Capital.