Monte Brem partnered with two other former Pacific Corporate Group pros to launch Leucadia Capital Partners (see story, page 5). Brem is CEO of the firm, which aims to advise limited partners around the world and help them build portfolios of investments in private equity, particularly in funds in Western Europe.
Brem is a former Gibson Dunn & Crutcher attorney who later became president of PCG, where he managed more than $15 billion in assets. Mark Cecil (of PE Week sister publication Buyouts) caught up with Brem to ask him about the new firm and to talk about the importance of 360-degree reviews.
Q. Competition for talent is tough, and PCG saw a number of defections within the last few years. How will you create a long lasting firm?
There are two components to it. One is compensation. Our philosophy is that we want to generate top-quartile returns—so we pay top-quartile compensation. You add to that some form of ownership for employees in the firm. The way we do it, the employees have an interest in the profits and the underlying equity of the firm. They are really owners.
Q. Give a broad outline of how you structured your firm.
We wanted to have the vast majority owned by employees [the firm is 80% employee owned]. We thought that was extremely important. We also wanted to have enough working capital to pay them right away. Argonaut Capital [funded by Leucadia’s client, billionaire George Kaiser] provided us with the working capital we needed for two years. We now have five professionals that are ‘announceable’ and we have two more that are committed, but working through their departures so we can’t announce that they joined yet. We’re in advanced discussion with additional people so we’ll have 10 in June.
Q. At firms that see lots of turnover, what do you think the problem is?
The thing to remember about investment firms is that people are 99.5% of the value. People want to be part of an organization that mirrors their values. The first step is to create an organization that has clear values. Then you recruit individuals that hold the same views. At PCG they’re trying to do the exact same thing. During my tenure at PCG we didn’t lose one pro. With the right approach we’re confident you can have limited employee attrition.
Q. Your firm formally launched this month. Why do you think Leucadia Capital hires will stick around?
We’ve done work analyzing what motivates people. We did a survey of employees and found that compensation and opportunities for professional development were what people thought were most important. One of the tools we use is 360-degree reviews. We make sure everyone in the organization gets reviewed so they can improve. That includes me getting reviewed. The other is creating an environment where merit is really the key to how you succeed, not age or seniority.
Q. Where is your greatest competition for talent coming from?
Direct investment shops—that’s definitely one. Funds-of-funds. Those are by far the primary competitors for out talent.