The Danjumas are not your ordinary wealthy family. Whenever their family office wants to work with a new bank, its chief executive Geoffroy Dedieu sends over “at least” two arch-level files of information on the family. And that’s just to do the “smell test”, before due diligence is even considered. Then, so long as the smell test is okay, it’ll take another four to six months before the relationship finally gets off the ground.
It doesn’t make for an easy life for Dedieu. But one glance at the family’s background and it’s not surprising the Danjumas raise red flags. This isn’t some family from France or the US that made its money in retail or manufacturing. No, the Danjumas come from Africa – the first red flag. And more concerning, they’re from Nigeria, widely known for “bribery, corruption and financial irregularities”, as Dedieu has said in the past. Then there’s the fact that the patriarch, Theophilus Yakubu Danjuma (pictured above), was head of the Nigerian army during the 1970s and later had a short-lived political career as a member of government. To top it off, the family made its money in oil – thanks to an oil block it bought cheaply from the Nigerian government in the 1990s. “You add all that together and that is a high-risk portfolio for any bank or financial institution,” reckons Dedieu.
The 43-year-old says all this without batting an eyelid. Dedieu (pictured, right) first began working with Danjuma as a banker in Asia. “As a banker, I opened an account for this family when I was with Fortis, which is now part of BNP, and later at Julius Baer in Singapore. And this is one of the most difficult profiles I have had to deal with … I had to justify it to my compliance team, my risk department, my management.”
Sitting in his office, Dedieu is a long way from Nigeria and even Singapore – and not just in physical distance. The TY Danjuma Family Office is based in Esher – a small, wealthy town in Surrey, one of the affluent so-called Home Counties that surround London. Trees, turning golden as autumn descends, dot the grounds while Sandown Park racecourse can be seen in the background. But there are hints of Africa within the building. Paintings by African artists cover the white walls, and amid the computers and the grey Commander 1900 Series safes, sculptures are dotted around the open-plan office space. There is a multi-coloured painting of a person wearing a tribal mask, and on two grey plinths are sculptures of motorcycle helmets. More art is stacked against a wall. Each room has “at least two or three of these paintings”, says Dedieu.
It makes the office “interesting” but that’s not the reason the art is here. “Our private equity arm serves from time to time as a sort of a family incubator for family members who want to start businesses, and one of the boys in the family wanted to go into the art business. We helped him prepare a business plan and now we are helping him store it,” he says. The family member, who Dedieu won’t name, is looking for storage space in London, but for now the Esher office is home to the art. “We have had to change our insurance policy because we realised quite quickly that we were above the limits,” says Dedieu. They’ve had to “modify and increase” security too.
The Frenchman set up the Danjumas’ family office three years ago. At the time, he was based in Asia and working almost exclusively with single family offices – most of them running money for emerging market families. But he also worked with individual families, including the Danjumas.
They had got badly burned by the 2008/2009 financial crisis, losing “quite a lot of money using a multi family office structure” in Switzerland, says Dedieu. The family’s money was exposed to risks the patriarch wasn’t aware of, he adds – the Swiss firm was taking a “rather aggressive” line with the family’s portfolios, but Danjuma wanted a more conservative approach. “The family takes a high level of risk at home, and in the businesses that it is still involved in,” says Dedieu. Danjuma wanted to make sure the money he invested was “very, very safe” for his children and grandchildren.
That job is now in the hands of Dedieu. “We started in 2009 – two guys, two laptops and I went to Sainsbury’s to buy a printer,” he says. The living room of his colleague’s flat was their office. The SFO now employs eight people, and runs the family’s own fund as well as managing TY Ventures, the private equity arm, and TY Properties – which invests mostly in real estate in Surrey and London.
The fund, called the TY Global Conservative Fund, has $150 million (€116 million) under management – all family or family-related money. They handle all their own investments, including buying bonds directly, not funds or structured products. “We don’t give money to fund managers,” says Dedieu. The fund management industry isn’t incentivised to keep their own internal costs low, he’s said previously – and he reckons clients bear the brunt of this with costs that are passed on to clients often not fully disclosed.
Dedieu is trying to take fewer risks with the family’s money. “We are Libor plus 200 basis points as a target for returns. So it is an extremely conservative profile. It is definitely wealth preservation,” he says. In the year to 10 October, the fund is up 3.78% – so it’s doing slightly better than its benchmark given the Libor is currently at around 1%. But Dedieu reckons it has become harder and harder to run a conservative investment strategy. “Nowadays, unfortunately, our strategy is becoming very fashionable – everybody wants to be conservative and look at emerging market equities or debt and commodities.”
It’s reassuring, he says, that others believe in the same strategy as the TY Danjuma office. But it also worries him – there are too many people trying to get into a market where volume is already too low. The family office’s conservative focus means the fund is a minimum of 50% fixed income – it has tried to diversify into emerging market issuers, but there is simply no volume in the market. “The bonds exist, but everyone is sitting on this paper.” He adds: “I don’t like to be in a place where everybody suddenly likes to be.”
What will the family office do? This is where being conservative becomes a problem. “Our investment guidelines, for example, don’t allow us to hedge,” he says. “When you are a very conservative investor in a very conservative place that is under threat, you are in a lot of trouble.” Right now, it has responded by shortening duration – it’s invested in some “very, very short [maturity] bonds”. In any case, he reckons, “it’s better to have 20 short bond lines than one bank deposit, where you don’t know if your bank will be there in a few months”. Dedieu, like many family office executives, is still fearful of counterparty risk.
That’s not the only problem he has with the current investment climate. “People have a short memory and the financial industry has a very short memory,” he says. “The one thing we have been saying is that we are seeing the same things being done now that were being done before the crisis happened. It’s a kind of same-old, same-old,” he says. When it comes to financial products, the “same rubbish” that led to the past issues is being touted again. “People are just happy to forget.”
Dedieu doesn’t seem to want to. He wants changes – better regulation, more transparency. He’s happy to talk about the family’s background, the costs of running the office, about its investment strategy – he even offers a copy of the SFO’s investment guidelines. The TY Danjuma Family Office’s annual report is published on its website and once the 2012 accounts are ready, he emails them over.
He gets “nervous” when he hears family offices complain about too much regulation. “Fundamentally, I’d say 90% of these rules are aligned with the interest of the family as investors,” he says. The office has taken compliance one step further than some SFOs and runs itself as a “regulated fund manager would”.
The family has a right to know, for example, if staff are getting gifts from private banks, he says, adding: “We have our conflict of interests policies in place, we have our employee code of conduct, we have investment guidelines, we have an investment committee.”
Yes, it’s a pain and extra work, he says, but this is the man who thinks nothing of sending banks two arch-level files of information before opening an account. It’s not too surprising he doesn’t understand why some SFOs complain about regulation or don’t keep account of who got Wimbledon tickets from a private bank. He says: “There is a laziness aspect that I don’t like [to SFOs’ complaints]. Who do we work for? We work for the family – we should protect their interest.”
Theophilus Danjuma: Oil baron
Theophilus Danjuma is, according to Forbes, the 21st richest man in Africa and Nigeria’s biggest philanthropist. Turning 74 in December, he’s packed a lot into his life. As well as his stints in the army and in politics, he’s also made a name for himself as a businessman. He set up the Nigeria America Line, a shipping business operating between Nigeria and Brazil, in 1979.
But the family’s biggest source of wealth is oil. In the 1990s, Nigeria’s government decided to “allocate oil blocks to successful businessmen” who had the resources to put in place an exploration programme, says the chief executive of the TY Danjuma Family Office, Geoffroy Dedieu. Danjuma bought the Akpo block (pictured) for $25 million – and created the company South Atlantic Petroleum. Dedieu says it was a risk then – oil was only $13 to $20 a barrel, the block was 100 kilometres from shore and 1,000 to 1,300 metres deep. Too deep considering the price of oil at the time, but Danjuma has “always made big bets”, adds Dedieu.
The Nigerian made use of his contacts in Brazil and got Petrobras on board. Later, he sold a large chunk of it to China National Offshore Oil Corporation – netting himself $600 million in the process. Many of the licenses issued in the 1990s have since been revoked – but Danjuma’s was one of the few to be maintained. Dedieu says this is because Danjuma paid for it, found the right partners and was prospecting on the block. “We were developing that block. A lot of the
He adds: “My employer is a very successful businessman in a country where being successful is very difficult. He has always steered clear of trouble, he has never had any indictment, investigation and has not been found guilty of any sort of wrongdoing, ever.”
The case for an SFO
Dedieu is clear about one thing. He doesn’t believe in the multi family office model. “This is the message of MFOs: ‘Compared to banks, and private banks in particular, we the MFOs are on your side and we do not have conflicts of interest’. I have an issue with that because MFOs are businesses,” he says. “They need to make money – there is an inherent conflict of interest there.” In contrast, single family offices are not businesses. “We do not have clients for example, we have owners and technically we draw some fees to pay salaries for example.”
But ultimately, he says, an SFO is a cost centre. He reckons using an SFO is often cheaper than leaving money in the hands of an MFO or a private bank. Yes, he says, it takes time to recruit the right people for roles – but this is becoming easier, especially if the office is set up in jurisdictions like the UK or the US, where you can find and attract talent. Despite staff, rent and IT costs, the TY Danjuma Family Office still works out cheaper for the family than leaving the money in the hands of an MFO or private bank, he says.