Roderick van Zuylen is prepared for the challenge. On the 1st of January, the ex-Van Lanschot Kempen portfolio manager inaugurated his own investment fund in the US: Night Watch Investment Management. “I desired a name that alluded to my Dutch heritage, yet Dike Capital and Tulip Invest were disregarded for obvious reasons.”
It is the day after Boxing Day, half-past eight in the morning. The 36-year-old portfolio manager and triathlete from the Dutch town of Capelle aan den IJssel has just concluded his training in the outdoor pool when he converses with Investment Officer.
In September, Van Zuylen relocated from the Netherlands to Palm Beach Gardens, roughly ninety minutes north of Miami, Florida. His wife, an American, had been requested by her employer to return to the US after an eight-year sojourn in the Netherlands. Van Zuylen seized the opportunity.
He resigned from Van Lanschot Kempen, acquired a residence in the US, and this month launched his own US investment fund, Night Watch Investment Management. Assistance comes from former colleague Martijn Kleinbussink, who serves as a portfolio manager at a family office in Amsterdam.
“My wife hails from a more entrepreneurial family. Two years ago, they suggested I ‘embrace a bit of risk in life.’ I assumed my role as an investor was nothing but that,” remarks Van Zuylen. He embraced the advice, investing all his assets into the new venture.
Netherlands vs America
The nod to the 17th-century painting by Rembrandt van Rijn and the watercolour sketch of the quintessential Dutch windmill on the fund’s website reveal a certain national pride. Yet, Van Zuylen is not strictly committed to the Netherlands. Before mastering the investment trade in the Netherlands at Laaken Asset Management and Optimix Vermogensbeheer, he resided in Singapore, London, China, Spain, France, and Sweden.
Van Zuylen believes that understanding countries - and their differences - is crucial for becoming an adept investor. Whether US investors, known for their domestic bias, will value this remains to be seen. However, Van Zuylen, buoyed by a network of family and friends as potential clients, remains hopeful.
“Despite the prevalent trend of Americans investing domestically, there is potential for diversification. There are compelling reasons to anticipate that US stocks will continue to excel in the long term. However, most here invest in the same stocks with various asset managers. We present a global portfolio with lesser-known entities,” explains Van Zuylen, who levies a management fee of 1 percent and a performance fee of 10 percent from unitholders for his services.
The fund targets two specific investor groups: high-net-worth individuals and family offices or other wealth managers. Van Zuylen notes that the extremely wealthy often invest smaller sums short-term, making them more accessible. However, he admits that fostering a relationship with a family office or wealth manager as a client is a prolonged endeavour. Presently, Van Zuylen is negotiating with a family office in Colorado.
Fund structure
In the Netherlands, an investment fund typically takes the form of a Fonds voor Gemene Rekening (FGR), or foundation. Night Watch, conversely, employs the standard US dual-entity setup: a Limited Partnership with a General Partner. The fund is registered in Delaware, where tax regulations favour entrepreneurs.
“Moreover, to start a fund in the US, one requires a legal document, a private placement memorandum, provided to potential investors when selling shares or other securities. Another obligatory document is the agreement between the limited partners, or fund participants, and the management, the general company,” elucidates Van Zuylen.
“Most US fund managers eventually establish an offshore fund, often a corporation in the Cayman Islands or British Virgin Islands. However, this necessitates appointing two independent directors, significantly elevating costs.”
Redneck Riviera
Van Zuylen is transparent about his investments. The portfolio’s largest position is in St. Joe, the predominant landowner in Florida’s Panhandle, just south of Alabama. “This company is relatively unknown as it lacks sell-side coverage.”
The chairman holds 40 percent of the company, and the region between Panama City Beach and Destin, known as the “Redneck Riviera,” is entirely owned by St. Joe. Over the past four years, the company has achieved critical mass, sufficient for commercial viability and residential settlement. St. Joe owns all the houses, hotels, the sole club facility, and most of the restaurants in this region. “This will fund my retirement and, hopefully, that of my clients,” Van Zuylen asserts.
The portfolio’s second major holding, Brunswick Corp., also epitomises Florida. Alongside Yamaha, the company forms a duopoly in the outboard motor market. Rising interest rates have pushed many consumer goods out of portfolios, but Brunswick persists due to its expanding market share. Americans are opting for increasingly powerful and costly engines. “Many are relocating to Florida, and apart from myself, nobody plans to reside there without a boat,” states Van Zuylen.
While Van Zuylen chases his American dream, he doesn’t entirely discount the Netherlands. “I’d relish the opportunity to establish a fund there too,” he mentions. “However, intricate regulations, including mandatory ESG ratings on funds, and the substantial tax burden on the affluent make founding a fund in the Netherlands a formidable challenge.”
Further reading:
- Kempen cuts classification of three sustainability funds
- Anti-ESG policy seen as reason to underweight the US