Reuters: Papamarkou sees rich leaving blemished banks

Papamarkou sees rich leaving blemished banks

By Joseph A. Giannone

NEW YORK | Fri Jan 28, 2011 2:03pm EST

(Reuters) - The biggest banks and brokerages may have recovered their strength since 2008, but ultra-wealthy families are looking for new money managers whose reputations were not damaged by the financial crisis.

So says Karl Wellner, whose Papamarkou Wellner Asset Management Inc. has been attracting clients and bankers from many of the largest wealth firms. Even as the banking crisis recedes in memory, the independent and employee-owned firm's client assets are approaching $3 billion.

"It used to be that the big banks were the gold standard -- I'm not going to mention names -- and now every one has blemishes," Wellner told Reuters. "So clients say 'I may as well give a boutique firm a try, so whenever I call, I will be taken care of.' It's a whole different approach."

Small "boutique" firms grew by leaps and bounds in the wake of the crisis, which nearly toppled giants like Citigroup and Morgan Stanley. Mergers also concentrated private banks such as U.S. Trust in the arms of financial giants.

Recently Wellner said Papamarkou took on a former U.S. Trust client frustrated by overturn among staffers handling his account, problems with statements and unresponsiveness to his telephone calls, Wellner said.

"These big banks put up beautiful labels -- 'private bank,' 'wealth management' -- and they fancy up the office, but the chain is never stronger than the weakest link," Wellner said. "You have to have people who really understand how to work with clients."

New York-based Papamarkou was founded about 29 years ago by a former E.F. Hutton broker named Alexander Papamarkou, whose ties to Greek shipping magnates and their friends helped put him at the center of an immensely rich club.

Today more than half of Papamarkou's clients are from outside the United States, a mix of Old World royalty and newly rich entrepreneurs.

Papamarkou was famous for showering his super-rich clients with luxury gifts.

Wellner, a Swedish-born investor from a wealthy Estonian family, got a call 13 years ago when Papamarkou, then 68, died of a heart attack at work. With no heirs or succession plan, Papamarkou's trustees hired Wellner as CEO and then five years later sold him the firm.

The firm has been expanding quietly and in 2009 moved into bigger offices on Park Avenue. Today it has about 125 client relationships, including some multi-generation families, endowments and foundations.

An independent, employee-owned firm, Papamarkou avoids conflicts of interest by not creating its own investment products.

Aside from bestowing gifts upon its clients, Papamarkou tries to earn its keep by finding obscure but top-performing hedge fund managers and providing some truly "under the radar" investment opportunities.

Papamarkou managing director Thorne Perkin described how one client, whose family had been in the metals trading business for decades, created a fund to invest in "noble metals" used to improve steel when steel prices plunged in 2008. Papamarkou helped other clients to invest in the fund, which surged as metals prices recovered.

"These are the advantages of having the network," Wellner said. "You won't get those kinds of opportunities at Morgan Stanley and other big banks. Who are they going to call?"

Perkin said even Goldman Sachs' $1.5 billion Facebook investment vehicle, widely considered a coup until it was forced to yank the offering from U.S. clients, had its flaws as a "late-stage" investment at an inflated valuation.

(Reporting by Joseph A. Giannone, editing by Matthew Lewis)

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Friday, January 28, 2011