'We've done very, very well': The glories of alt investments, from Robert Janson

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As co-CEO and chief investment officer of Westcourt Capital Corp., Robert Janson embraces alternative approaches to portfolio construction – and no more so than now.

Raised in Canada, in 2000 Janson left for Switzerland, where he worked as a high-net-worth advisor at UBS, the big Swiss bank, learning alternative ways to invest amid the global financial crisis. He returned home after a decade and in 2013 joined Westcourt, which had been started in 2009 by business partner David Kaufman, also a strong proponent of alternatives.

Today the firm has a staff of 40, and it manages more than $6 billion in assets, with client accounts ranging from $5 million to $400 million.

We asked Janson to share his thoughts with Canadian Family Offices on the benefits of varied asset class exposure, its appeal for family offices and what makes the approach especially useful in 2024.

What is Westcourt Capital all about?

Fundamentally, we’re a research firm. We sit on the same side of high-net-worth and ultra-high-net-worth families to source, due-diligence, structure, invest in and monitor investments in the alternative universe. That’s been our bread-and-butter right from the beginning.

Why is that unusual, and useful?

We’ve been ahead of the game – certainly by a few years, if not a decade – with regard to the way financial services and advisory is now perking up to the world of alternatives.

The way to build portfolios and the way that money is managed outside of our country is to use as many different asset classes as you can. It gives you more arrows in the quiver.

And that’s a contrast to the practice in Canada?

In Canada, it is still very much stocks and bonds. But if you leave our shores, it’s to also use private equity, private debt, real estate debt, real estate equity, hedge funds, infrastructure, etc.

So, we haven’t really invented anything. We’ve simply borrowed from the way that money is managed all over the world by sophisticated families and family offices.

And wealthy families here are okay with alternatives?

If you’re a family office with a few hundred million dollars, it would almost be naive to just be invested in stocks or bonds. Now, some might, because they find an affinity with that asset class, and maybe they have an edge or they have an expertise in it.

But the classic example is that an enormous amount of wealth in this country has been created by very long-term real estate holdings. And whether that be farmland that their grandparents had or commercial real estate or multi-family, people have done exceptionally well holding real estate over the past 50 to 70 years. That unto itself could be considered an alternative investment, which falls outside the public markets.

Real estate investment sounds pretty solid for something called ‘alternative.’

There are different shades of alternatives. I don’t believe the word ‘alternative’ connotes risk anymore. Not that it ever did in the beginning. The smoke and mirrors or the unknown that was alternatives maybe 10 or 20 years ago is simply not there now. And we see that as well, because we have as competition the banks and others perking up to the fact that, yes, large families and wealthy people are asking for these types of exposures.

How have alternatives done for Westcourt?

If you take a look at our growth rates in comparison to other firms over the past decade, we’ve done very, very well, because people have become more and more interested in alternatives.

In this industry, if you’re not offering clients what they’re asking questions about – or what their friend or family member has told them about at the swimming pool, on the first tee of a golf course or at a family gathering – they’re going to go and find it.

What are wealthy people investing in today, and how are they sitting mentally in the new year?

Obviously, it’s been a tough two years. If you rewind back to this time in 2022, you’ve got two wars that have broken out, inflation has taken hold and interest rates have climbed. You had a horrific year in the markets in 2022 and then you had a rebound in 2023, so the public markets are essentially flat. So, what are we focusing on? What has done exceptionally well? Real assets.

Real assets are by definition things you can touch and you can feel, and they’re usually highly correlated to inflation. So, in our real estate holdings, we’ve got more than a billion dollars in Canadian apartments. You’re not going to brag about it at a cocktail party, but those exposures to real estate, infrastructure, self-storage, farmland, etc., have done remarkably well in a period of high inflation. We’ve made double-digit returns with those exposures, year over year.

Why do such investments appeal to family offices?

For the majority of our clients, if not all of them, the question of ‘how much is enough’ is in the rearview mirror. They have had immense success in business or other areas, so they’re not trying to get rich twice.

People want to garner a reasonable rate of return with their investments, certainly to keep up with inflation, to solve for their lifestyle needs, maybe for some charitable giving, maybe some fun money. And after that, it’s wash, rinse, repeat. So, the majority of our clients are trying to make a reasonable rate of return in most environments and not chase the bright, shiny object.

Any particular concerns that such clients have right now?

There was a certain amount of complacency pre-COVID. You had a march with public markets from 2009 to 2019, 10-plus years with very calm markets that just trended higher, with a low-interest-rate environment. And then COVID happened, interest rates happened, inflation happened, wars happened and you had a collective shaking up of the global snow globe.

I think what people want right now is to get back to a more normalized environment and to have the world turn normally, with a little bit of calm.

What would bring such calm? And what could threaten it?

If we can notch down on the interest rates, if they are cut by 25 basis points each time, that will bring a gradual slowdown and that soft landing that everybody’s trying to engineer. If it’s mis-engineered – and trust me, it’s a blunt object, interest rates, it’s not a scalpel, central banks have not always gotten it right – then the economy is doing way worse than you thought, and you might have to cut interest rates by a point or a point and a half. That re-shakes up that snow globe, because the seeming continuity or calm won’t exist.

So, are we going to Thelma and Louise off the economic cliff? Or are we going to have a mild recession, which is needed to help stymie a little bit of the inflationary forces? That’s probably the biggest thing that’s on peoples’ minds.

Your thoughts on what the markets will do this year?

I think the markets can continue to be healthy if that soft landing is controlled, engineered and adhered to, with inflation and interest rates slowly drifting lower. If we miss the mark on bringing inflation down, and then the interest rates that therefore follow, then markets will take an absolute beating.

So alternative investments are especially a good thing in this context?

Let me give you an example: farmland and apartments. If inflation means rents are going up and food is becoming more expensive, we say wouldn’t it be interesting to own both the farm and the apartment building?

A final word on how your firm is positioning for 2024?

We’re embracing longer time horizons, allowing those inflationary winds to be the wind in our sail, continuing to garner that real-asset exposure and embracing a higher-interest-rate environment, the ability to produce cash flow with higher interest rates. And we keep working hard.

It’s really easy to be an advisor when it’s easy times; you’re judged as an advisor or portfolio manager during very difficult times. But that’s the business.

Responses have been lightly edited for clarity and length.

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