Pathstone, a partner-owned and private equity-backed multifamily office with close to $100 billion in client assets, is announcing its 14th acquisition in as many years.
Pathstone is buying Crestone Capital in Boulder, Colo., a 56-person firm with about 25 advisors managing $3.65 billion for 180 clients, including a handful of charities and corporations, and in 59 pooled investment vehicles.
Approximately $3 billion is managed in custodial and pooled investment accounts for about 150 households with an average $19 million in assets, according to a firm spokesperson.
The deal, expected to close by the end of the quarter, will bring Pathstone back over the $100 billion threshold after recent markets took a toll, according to CEO Matt Fleissig.
Founded in 1991 by CEO/CIO Eric Kramer, Crestone is 100% employee-owned and has additional offices in Denver, Austin and Los Angeles. The firm specializes in working with ultra-wealthy entrepreneurs and executives, leveraging industry relationships to offer access to institutional asset managers.
“We’ve admired them from afar for a while,” said Fleissig. “There are very few firms out there that really focus in the ultra-high-net-worth space; these folks get it. They also have some really unique capabilities on the alternatives side of the business that we were very interested in.”
“They have some very, very unique access to different managers that are hard to get access to—co-invest, direct, etc.,” he said.
“Pathstone’s laser focus on ultra-high-net-worth clients meshes nicely with our entrepreneurial and largely self-made clients,” Kramer said in a statement. “The advantages of scale are becoming increasingly important in our industry, and Pathstone also offers a number of complementary services that are valued by our clients.”
Based in Englewood, N.J., Pathstone has grown assets from around $2 billion when it officially launched in the summer of 2010.
After hiring 98 people last year, the firm is becoming more focused on adding talent and capabilities through M&A.
“We’ve found combining with people is a more successful route than trying to bring people on one by one,” Fleissig said, citing the spring 2023 acquisition of $2 billion Brainard Capital, with seven employees and two advisors serving a niche client roster of tech entrepreneurs.
“Recruiting through acquisition is probably the way I would say it,” he said. “We just have found that it’s very hard to find people who know how to work with $100 million families.”
"The complexity of UHNW clients can make a move more difficult for a single advisor," agreed John Langston, whose investment banking firm Republic Capital Group advised Crestone on the deal. "Explaining that you're becoming part of a larger, growing firm through being acquired is much easier than a transition."
That said, Fleissig stressed that Pathstone is “very, very picky on the partners we find” and said there’s no rush. He noted that building out in-house cybersecurity, legal and insurance departments, in addition to finding talented UHNW financial advisors, remain areas of focus.
Of approximately 550 Pathstone employees (around 100 of whom are advisors), roughly half own equity in the firm. The employee ownership model was introduced in late 2019, following an initial investment from Lovell Minnick Partners at a time when Pathstone claimed close to $15 billion in assets.
“It's really been special from the client experience perspective, where the clients know that they're being served by owners of the firm,” Fleissig said. “And we found that it also really helps retention and makes Pathstone an attractive destination—for your career and to make cash comp, but also build your net worth at the same time.”
Currently, Pathstone is looking to grow its presence in existing markets and fill in some gaps in the middle of the country. Not including Crestone teams, the firm has 19 locations in 13 states.
“If you look at our footprint, we look like a U right now,” Fleissig said. “So, there’s definitely something missing in the Midwest and the rest will be continuing to look to expand in our current locations.”
“I would say it was strategically important for us to have a presence in the Rocky Mountains, but at the same time, this was about people, talent, capabilities and coming together,” he noted. “And we’ll continue to look to expand. Denver and Cherry Creek and Boulder are some of the best demographics in the United States right now. And outside of Dallas and Austin.”
Early last year, middle-market private equity firm Kelso & Company joined LMP as a Pathstone investor, prompting LMP’s investment banker Peter Nesvold, also of Republic Capital Group, to declare the firm had become a “buyer of choice in the UHNW market.”