Funeral Home Aggregator Plants Flag on Wall Street
Foundation Partners Group registers its own money management unit
One of the nation’s larger funeral home operators is setting up shop on Wall Street, figuratively if not geographically.
Foundation Partners Group, a private-equity backed aggregator of funeral homes, registered its own money management unit with the Securities and Exchange Commission, according to a September filing. The newly registered subsidiary, Orlando Funeral Advisors LLC, manages about $66 million through a single investment vehicle, according to the document.
Company officials declined to comment on their reasons for setting up Orlando Funeral Advisors, which registered as an exempt-reporting adviser, a status that requires far less disclosure and regulatory oversight. One possible reason for the money manager, according to a personal familiar with the company, involves prepaid funeral arrangements.
Many people prepay for their funerals, either because they don’t want their descendants to bear the expense or because it helps in reducing assets to qualify for Medicaid coverage of nursing home care. That leaves funeral home directors with a pot of money that they need to invest until people die.
``It’s a big chunk of change,’’ said Mark Mannix, the chief investment officer of Cooperative Funeral Fund Inc., a Madison, Connecticut, money manager that oversees about $750 million on behalf of funeral homes, cemeteries and monument companies. ``There’s a bigger balloon of money coming into the funeral service industry’’ as baby boomers age, Mannix added, while noting that the industry has become less profitable as more people opt for cremations over burials.
On average, people live another seven to seven-and-a-half years after prepaying for a funeral, Mannix said.
Member-Managed Investment Fund
Most states have rules on how funeral homes must handle prepaid funeral receipts, mandating that they either put the funds into a trust or into an insurance policy that pays out when the client dies. But other regulatory details vary from state to state; some allow funeral homes to put the prepaid cash into equities, for example, while others restrict the investments to safer alternatives, such as Treasuries and bank certificates of deposit, Mannix said.
Orlando Funeral Advisors has a single investment vehicle called Canton Consolidated Trust Holdings LLC, according to its SEC registration. The document describes Canton as a member-managed investment fund, adding that Regions Bank serves as trustee for the members.
Foundation, which describes itself as the second largest provider of funeral services in the U.S., was acquired in 2015 by Access Holdings Management Co., a Baltimore-based buyout firm that focuses on buying providers of essential services. Under Access, the Winter Park, Florida, company expanded through acquisitions, with a focus on buying funeral homes that specialized in cremation.
Foundation’s business spiked during the pandemic, and Access began laying plans to take it public, according to the person familiar with the company. The initial public offering never came to fruition – the surge of business from the pandemic proved short-lived – and Access instead sold Foundation to a continuation fund led by Coller Capital in September 2021 for about $500 million, according to reports at the time. Access reinvested its proceeds from the transaction back into Foundation, the reports said.
The company has undergone numerous changes this year, starting in January, when it appointed John Smith, the former head of New York-based Icon Parking, as chief executive officer. And in August, Foundation said it had raised fresh growth capital from institutional investors, thereby recapitalizing the company with modest leverage and strong liquidity. The release didn’t provide any additional details on the investment.