S.D. Sioux Tribe Aims to Use Buyout for Pension Asset Edge
Ackermann, Matt, American Banker
Byline: Matt Ackermann
Far from any population center, Michael Jandreau, the chairman of the Lower Brule Sioux Tribe, knew even an enormous casino couldn't generate enough revenue for the South Dakota tribe.
So he did the next best thing: he bought a wealth management company, Westrock Group Inc. in New York.
Being the only 100% tribally owned wealth management company will distinguish Westrock from other minority-owned firms, even those with Native American investors, in the competition for federal and stategovernment pensionfund business.
There are a number of "minority-owned wealth managers run by women and African-Americans that are able to generate business from various governments, municipalities and private corporations," said Burton Greenwald, of BJ Greenwald Associates in Philadelphia. "Large institutions seek out these firms. ...There is a lot of money to be made in the name of diversity."
Analysts said many tribes have opened casinos and invested in wind farms or solar energy, but none have considered the financial sector as a way to generate revenue. The Lower Brule tribe, Jandreau said, is looking to diversify its revenue sources and participate directly in the capital markets.
Donald H. Hunter, who will remain Westrock's chief executive, said he wants to take advantage of the company's new status as a minority-owned wealth management company to attract more pension funds. Westrock also plans to create a tribal assistance services unit to advise tribal governments on financial matters.
Hunter said his hope is that by going after pensionfund assets, Westrock, with $1.4 billion of assets under management, will be able to increase that numbertenfold in the next 12 months.
Westrock also will now be able to offer retail brokerage companies' products, because these outfits often syndicate their wares through minority-owned firms. Larger brokerage firms, including Goldman Sachs Group Inc. and Morgan Stanley, give 7% to 15% of their underwriting to minority firms, Hunter said.
"For Westrock, this takes us from being a good firm in New York to being a major midtier player," Hunter said.
Experts caution that minority ownership can be an advantage but not the sole determinant of getting business with public or private players.
"In government contracts, minority firms will certainly make the first and second cuts because they are minority-owned, but ultimately they will have to deliver strong results to continue to generate business over time," said Geoffrey Bobroff of Bobroff Consulting in East Greenwich, R. …