Sound Capital Partners, a Seattle money-management firm that once handled about $1. 3 billion of investor money, has shut its doors, the...
Sound Capital Partners, a Seattle money-management firm that once handled about $1.3 billion of investor money, has shut its doors, the second such local company to close recently.
Formed by six investment managers who left Bank of America in 1998, Sound Capital closed Dec. 31 after its pool of assets declined as clients moved money elsewhere, according to people familiar with Sound Capital’s decision.
Assets had shrunk to the point where it “wasn’t economical to remain in business,” one of these people said. The number of employees fell from 11 at the peak to seven before the closure.
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Officials at Sound Capital’s parent, Chicago-based Burridge Group, didn’t return calls seeking comment. Burridge owner Affiliated Managers Group of Boston declined to comment.
Sound Capital’s closure coincides with the shutdown of Sirach Capital, another Seattle money-management group that once handled about $8 billion for clients. Sirach, which had been in business for 23 years, also shut Dec. 31, after its funds declined and clients defected.
Unlike Sirach, which focused on growth-oriented companies that suffered during the recent market downturn, Sound Capital managed large-cap “core” investments, a mixture of growth and value companies.
But Sound Capital also built its business around retail clients through so-called “wrap-fee” programs, where investors pay a fee based on their assets, rather than sales commissions. Big brokers like Merrill Lynch channeled clients to smaller companies like Sound Capital to handle wrap accounts.
But competition from alternatives such as exchange-traded funds with lower fees made it “very hard to justify payment of a management fee,” said one person familiar with Sound Capital’s business. Eventually, big brokers began steering clients back to their own brokers.
The resulting loss of wrap business cut Sound Capital’s asset base, according to those familiar with the business.
Sound Capital began with $200 million in client accounts it retained from Bank of America, and a 12-year track record of investment performance.
The portfolio managers included chief investment officer Robert Wiley and managing directors Robert Pyles, Gary Bech and James Simone. They couldn’t be reached or declined to comment.
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