[null, null, {"document_url": "https://www.barrons.com/articles/at-aspiriant-alternative-strategies-spell-success-1471060927", "unformatted_src": "https://asset.barrons.com/public/resources/images/BA-BL872_best_a_M_20160811165848.jpg", "src": "https://asset.barrons.com/public/resources/images/BA-BL872_best_a_M_20160811165848.jpg", "formatted_filename": "BA BL best a M", "alt_text": "EMPIRE BUILDER: Under Francais\u2019 guidance, Aspiriant has launched three mutual funds."}, null, null, {"document_url": "https://www.barrons.com/articles/at-aspiriant-alternative-strategies-spell-success-1471060927", "unformatted_src": "https://asset.barrons.com/public/resources/images/BA-BL872_best_a_D_20160811165848.jpg", "src": "https://asset.barrons.com/public/resources/images/BA-BL872_best_a_D_20160811165848.jpg", "formatted_filename": "BA BL best a D"}, null]
EMPIRE BUILDER: Under Francais’ guidance, Aspiriant has launched three mutual funds. Gregg Segal for Barron’s

Rob Francais began his professional life as a certified public accountant, but as clients increasingly sought his help with wealth management, he evolved into a full-fledged financial advisor. You might say his career chose him.

“You go where your clients take you,” says Francais, 50, the CEO of Aspiriant, a Los Angeles–based wealth management firm.

Francais is not only a capable advisor, but also a formidable business-builder. He engineered the merger of Aspiriant with Deloitte Investment Advisors in 2010, and recently closed two more deals with California-based firms. Today, Aspiriant manages $9.5 billion of assets and counts 160 employees in nine cities.

In the past three years, the firm created three mutual funds and hired respected firms such as AQR Capital Management and Nuveen Asset Management to help manage them. The in-house funds provide clients with lower pricing, more effective tax management, better diversification, and other benefits they wouldn’t get with off-the-shelf mutual funds, Francais says. Like many advisors, Francais and his team are grappling with low investment returns and heightened volatility—a one-two punch. To help clients capture decent returns while minimizing stock market risk, they are turning to strategies such as merger arbitrage, managed futures, and high-yield municipal bonds.

Francais (pronounced Francis), a Los Angeles native, earned a degree in economics and finance from University of California, Los Angeles. He later became a CPA, and by the mid-1990s was serving many family-owned businesses as an accountant and tax advisor. Clients frequently turned to him for help in selling businesses and managing the resultant windfall. “I didn’t know anything about managing wealth at the time,” he says.

That has changed. Aspiriant now serves 1,400 clients, most with accounts between $3 million and $60 million. To help safeguard their wealth, Francais and his team are advising them to position “a little more defensively.”

IN TODAY’S MARKET, Francais considers merger arbitrage a defensive strategy, so long as it is diversified and unleveraged. Merger-arbitrage investors buy shares of companies that have received buyout offers. The target company’s stock usually trades at a discount to the offer price, reflecting the risk that the deal won’t close. Once it closes, the discount disappears, handing shareholders a profit.

More from Barron's

Several high-profile deals recently failed to close, and spreads have widened on other deals. Even so, says, Francais, “while deal risk is arguably higher in merger arb today, we don’t expect nearly as much downside risk as in a traditional equity portfolio.”

Likewise, there is “potentially more reward available” in a merger-arb strategy for investors who do their homework right.

Francais is also high on managed-futures strategies, which use futures contracts to make bets on the price of energy, agricultural commodities, currencies, and other assets. Managed futures and merger-arbitrage are among the strategies employed by the $312 million Aspiriant Defensive Allocation fund (ticker: RMDFX), which has returned 1.2% so far this year, compared with a 0.3% decline for Morningstar’s multi-alternative category.

As for high-yield munis, Francais expects that continued, moderate economic growth in the U.S. will keep favoring these issues. The S&P Municipal Bond High-Yield index has returned 12.6% in the past year, compared with 6.6% for the S&P Municipal Bond Investment Grade index.

The Aspiriant Risk-Managed Municipal Bond fund (RMMBX) has a 10% weighting in high-yield munis. The $822 million fund has returned 4.3% so far this year, compared with 4.4% for the Barclays Municipal Total Return index.

ROUNDING OUT ASPIRIANT’S fund lineup is the $583 million Aspiriant Risk-Managed Global Equity fund (RMEAX). Its mission is to outperform global stock benchmarks while limiting losses from extreme volatility. Its two top holdings are two other funds, each accounting for 19.5% of assets: The iShares Edge MSCI Minimum Volatility Global ETF (ACWV) tracks a global index optimized for low risk, and the GMO Quality III fund (GQETX) owns 66 high-quality, market-dominating companies. The Aspiriant fund has returned 6.9% year to date, besting Morningstar’s world stock category by about two percentage points.

Finally, Francais sees long-term potential in emerging market stocks. “Yes, there are some structural challenges in those regions,” he says, “but there is a lot less valuation pressure, and the currencies could provide a nice long-term tail wind.”

Aspiriant’s Risk-Managed Global Equity fund has a 9.8% allocation to emerging markets, compared with just 4.8% for the typical world stock fund, according to Morningstar.

Francais has cultivated success without leaving his hometown. He’s also true to his school: He can often be found at UCLA football and basketball games, both at home and on the road.


 At Aspiriant, Alternative Strategies Spell Success


