Family Offices Focus on Experience
Family offices are a highly valued investor category in the alternative investment space. Fund managers are constantly looking to meet and develop relationships with family offices because they are typically perceived as long-term investors. As a result, BHA places a strong emphasis on working with family offices to capture their mandates and manager requirements.
In the past several weeks a trend has emerged among family offices: every family office that BHA interviewed in the hedge fund space was searching for fund managers with a track record of at least two-and-a-half years. The recent volatility and uncertainty in the equity markets has forced family offices to demand longer track records before they will consider investing with a manager.
Family offices are also turning towards experienced hedge fund managers that have shown a consistent and long track record of steady performance. The head of hedge fund research for a large multifamily office in the U.K. said that he will not even consider a fund that cannot show consistent and excellent fund performance over the past several years in both good and difficult markets.
Family offices are typically characterized as conservative investors. Poor performance, lack of transparency, and several high-profile fraud cases in the hedge fund industry in 2008 has made them even more cautious. The head of a small Canadian family office told a BHA analyst that the office was only interested in managers that have at least a five-year track record and an excellent background and pedigree. The hedge fund space has been so volatile that this office feels it is too risky to invest with inexperienced fund managers at the current moment.
Family offices are demanding experienced fund managers with extensive track records that show a consistent ability to produce solid returns in all market conditions. Brighton House will continue to monitor this trend and work with family offices to capture exactly what they are looking for in a fund manager.