In what may be a first, a Native American tribe is buying a broker-dealer and money manager, with a plan to win business by using its status as a minority-owned firm to appeal to Native American investors.
Westrock Group Inc. last week said that it has been acquired by LBC Western Holdings LLC, which is owned by the Lower Brule Sioux Tribe of South Dakota.
Terms of the deal weren't disclosed.
Until now, the Lower Brule Sioux Tribe's other businesses have included construction, popcorn manufacturing and farming. The tribe also has a small casino on its reservation.
Many Native American tribes have invested heavily in casinos and gambling over the years, and the financial-services sector could prove another profitable niche for this demographic, said Westrock's chief executive and president, Donald Hunter.
“I believe it could be,” he said. “We'll know in five to 10 years.”
Many Native American tribes have the cash to diversify.
Tribal casinos generate $26 billion annually of potential investible assets, according to the Indian Gaming Regulatory Agency's 2008 report,
The deal makes sense “because of the opportunities that are allowed to minorities in the process” of winning business from institutions such as pension funds, said Michael B. Jandreau, chairman of the Lower Brule Sioux Tribe.
A number of public-pension funds are required to allocate a certain percentage of assets to minority-owned money managers, for instance, with the amount varying greatly depending on the system.
"MORE ENTICING'
There are just a handful of such broker-dealers in the financial-services sector, Mr. Jandreau said.
“We can offer something more enticing to the adviser and to the public,” he said.
Westrock has hired Gavin Clarkson as director of tribal finance. He is a law professor at the University of Houston and a member of the Choctaw Nation of Oklahoma.
Westrock has also launched a Tribal Services Advisory Group, which will work with the Lower Brule Sioux and and offer other tribes wealth management services.
Adding to the mix at Westrock, the firm also last week announced a joint venture with Creighton Capital Management LLC, a quantitative asset manager that runs a hedge fund.
Mr. Hunter was one of the two former co-owners of Westrock, which has about 95 employee registered representatives and $1.4 billion in client assets.
He will remain in those positions.
E-mail Bruce Kelly at [email protected].
