Robert Daugherty is chairman of Endowment Assurance Corporation, which he established in 2020 in the middle of the pandemic. For over 30 years, Bob has straddled the worlds of investment management and academia. Since 2001, he has managed his family office as well as taught at two business schools.
Prince: How would you describe Endowment Assurance Corporation?
Daugherty: The Endowment Assurance Corporation evolved out of my family office. Because of the success our family office has had across various investments, other families started to show interest in what we were doing. Over time some families approached us about letting them invest with us. So, we have opened some investments to select families. The mission of Endowment Assurance is to ensure a peaceful and prosperous world through successful, transformative investments.
Prince: Can you describe your approach to investing?
Daugherty: We want to buy market leading businesses run by high integrity and passionate leaders. That means #1 or #2 in their industry and the company has differentiated, competitive advantages. We invest in areas that we know and like. The best question we always ask ourselves is what do we know that other people or the market doesn’t? Finally, we want to buy the business at a fair price. We run extensive financial models and scenarios to calculate the potential returns against what we see as the risks. Buying well is critical to generating excellent, long-term returns.
Prince: Can you give us an example of your investing in an individual company?
Daugherty: We recently sold a company in the education sector that helps over 800 colleges and universities in the U.S. recruit and enroll students. Bought six years ago, we found the deal and then brought in another family in California to partner with us. During our ownership, the company completed three add-on acquisitions and grew profits four times over. Our annualized return was over 28% and we decided to sell because we see the returns there normalizing to a lower number.
This is a perfect example of our investment strategy, which is to invest in businesses with sustainable competitive advantages that are seeking a sophisticated partner to help them reach the next level. We work closely with management teams at the strategic level to grow businesses into industry leaders through a combination of organic growth and strategic acquisitions. We believe in aligning the interests of management and shareholders by partnering with management in the ownership in each of our businesses. And then we bring resources from our extensive network in order to provide additional strategic guidance, operating capabilities and business planning capabilities to our companies.
Prince: You opened your family office to other families who are looking to capitalize on your investment acumen. Can you explain how you decide how you choose who to partner with?
Daugherty: We get a lot of interest from different families as well as some institutional investors such as pension funds. However, the way we approach co-investing, it’s not just about raising capital. We’re finding there are times we turn down prospective investors. We tend to be somewhat particular about our co-investors. There has to be alignment around the investment approach and what we want to accomplish, which is more than just getting a great return. To be clear, we are manically focused on getting great returns. It’s just that we want to invest along side people who have integrity and a commitment to a peaceful and prosperous world.
Prince: As you are dealing with many single-family offices and wealthy families, how pervasive is this trend of co-investing within this cohort?
Daugherty: We think this trend is strong and getting stronger. More and more wealthy families are co-investing together. The private equity and venture capital world has been doing this for decades. These so-called “club deals” provide diversified source of capital and bring together different networks. We’re seeing that wealthy families are finding this approach provides more opportunities to evaluate and better returns.
We’re also seeing growing interest in wealthy families creating consortiums. This is when they pool monies for a number of investments. It’s like a fund as opposed to making a decision to invest on a case by case basis.
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