Astarte Capital Partners Co-Founder: no management fees, no problem with expert team-up strategy
Charging zero management fees might seem like lunacy to many in the private equity space, but Astarte Partners Co-Founder Teresa Farmaki says its unique strategy is helping it thrive in the gaps left by traditional PE firms.
Since its founding three years ago the now 14-strong team has focused exclusively in real assets, including transportation, specialist real estate and natural resources, in a strategy which sees it co-invest with institutional investors to back specialist businesses that can be scaled. The firm aims to partner with expert industry teams and provide up-front investment capital, making returns for investors based on the performance of that investment and the growth of the business in terms of total assets under management. Farmaki believes that the strategy is why business is booming, and not enduring the slog of competing with industry players in an auction-like environment. She said, “We invest in the more specialist areas where we have attractive real asset strategies, but there are often not many established managers. This is either because the perceived market for them is small or because of operational complexities that make it more complicated for them to invest in the space.
“We aim to share a lot of the characteristics that institutional investors are looking for. So our strategy is to find strong operators or industry players in each sector and invest alongside them. Operational complexity is key in these asset classes. You need to know how to operate, and therefore we want to do partnerships with experienced asset operators. For example, in the aviation space you can find industry teams who have been working in a specific segment of the space for years. We create a partnership or joint venture with them and establish the appropriate investment product – it could be more like a fund or like a co-investment vehicle.” The firm then deploys some of its own capital, which comes from its partners and institutional investors, while opening it up to more investors. The policy of no management fees means that the firm is very much counting on the success of the investment to generate returns.
This new approach makes for a more transparent and forwardthinking model, claims Farmaki. She added, “What we have in our logo is ‘private capital working smarter’. This is because we want to bring a stronger alignment of interests in order to achieve superior returns. We aim to cover costs over the investment period when it’s too early to have results, so we have a transparent fixed budget and expenses that we share pro rata among all our investors; how we make money is we share the returns after exposing a business to a much larger pool of capital.
“It is very much results-based – we charge no fees until success and evidence of the value that we bring. It is very unique; we have not found anyone who has anything identical.” Because the strategy relies on the creation of investment opportunities, competition is lower, and the specialist focus means that it can go “under the radar” of bigger funds.