Firm’s capital more than a commodity

Two sets of brothers a generation apart have combined their successful investment companies.

The merger of Martin Investment Group of Spokane and Summit Capital Partners of Seattle creates a firm with $500 million under management, and ambitions to double that amount within the next few years while keeping their combined client base at less than 1,000.

The deal also brings together Rob and David Martin and John and Matt Rudolf, who share histories that intersect at Gonzaga University and Wall Street. The also share an approach to investing that delivers consistent returns with a minimum of risk. Their wealthy clients like that just fine.

“They’ve got the touch,” says Jim Harmon, senior vice president for investments for Sabey Corp., whose chairman, David Sabey, is a former trustee of Gonzaga. Harmon says he placed some corporate money with the Martins not just because he was sold on their investment strategy, which uses hedging to lessen risk, but also because the brothers treat their clients as resources for themselves, and other clients as well. Every year the firm holds a golf tournament that allows clients to meet and exchange contacts and information.

Harmon says he values those relationships as much as the Martins’ money management expertise.

“For us,” says Rob Martin, “capital is a component of a much broader relationship.

“Capital is a commodity for too many investment firms.”

The Martins started their firm four years ago despite warnings they would not find clients in the Spokane area willing to take a chance on a pair of relative youngsters — Dave was 29, Rob 30 — starting from scratch, whatever their credentials. Dave, a Gonzaga graduate, had been a stockbroker with Paine Webber. Rob was an investment banker based in Washington, D.C.

But with persistence and solid performance the Martins, with headquarters in the Paulsen Center, built a client base of more than 100 households and institutions, with $130 million under management. They say they are surprised and grateful for the support they received.

The Martins connected with the Rudolfs by way of a Gonzaga official who had consulted with Rob Martin. The official had been with Summit.

The Rudolfs are the grandsons of Carl Rudolf, who was a Spokane County Commissioner from 1949 to 1963. His Cheney farm remains in the family. Kermit Rudolf, their father, was a Spokane attorney, and served as general counsel to Gonzaga for many years.

John Rudolf founded Summit 10 years ago with a clientele he had amassed as a partner in Oppenheimer & Co. Inc.’s Seattle office. Matt began his career as a petroleum engineer with Cities Service in Oklahoma. He moved into banking in 1984, and joined his brother in 1997. Summit manages about $400 million.

The Rudolfs, both in their 50s, began to mentor the Martins.

“We just helped them kind of set up because they’re good guys,” Matt says. “Philosophically, we’re very aligned.”

John Rudolf says Summit flourished in the 1990s and managed positive returns through the 2000-2002 recession by keeping “one foot on the dance floor, one at the exit.

“That remains our posture,” he says.

With the merger, Rob Martin will move into the Summit offices in Seattle. Dave will remain in Spokane, where a staff of four will handle regulatory compliance issues, marketing and back-office functions. Investment decisions will be made in Seattle, although John Rudolf will maintain a New York office he uses to stay close to Wall Street.

Summit Capital will be the surviving entity. Clients from both firms were invited to this year’s Martin golf outing to make sure all were comfortable with the deal, which will not disrupt existing relationships

With preservation of capital to remain the mantra at Summit, Rob Martin says the partners are already diversifying assets away from reliance on North American equities. He will meet with investment managers in Asia later this month to scout opportunities. John Rudolf may join him.

Summit has also created a limited partnership whose funds they plan to manage like an endowment with assets spanning real estate, fixed-income assets, and small and private equity.