Family Offices: The Key to Getting in the Door
Family offices are one of the most highly sought after investors by alternative fund managers. These private and elite investment firms are major players in the alternative investments community, and one of the few investor categories that has consistently remained active in researching and allocating capital to funds throughout 2009.
During the last 30 days, BHA analysts have cultivated over 60 active mandates from family offices from around the globe. More than three-quarters of those mandates were for single-manager hedge funds that have a track record exceeding two years. Most importantly, however, these firms are looking for prospective managers who were able to expertly navigate 2008-2009 by providing stable results for investors.
A single-family office based in Philadelphia that is actively evaluating prospective fund managers is less focused on funds’ strategies than on managerial experience and expertise. It is seeking managers that have successfully navigated the turbulent economic environment from the fall of 2008 through the summer of 2009. To date, the bulk of managers that have contacted the office have emphasized their returns from the past six months, because they performed dreadfully during the latter part of 2008. The firm wants to hear from managers that are willing to tout their performance in 2008.
A family office located in New York City is another example of a firm focused on finding managers that offer both experience and skill. It is looking for a few long/short and global macro funds that have a track of at least four years. The firm wants to see prospective funds that finished 2008 either flat or with slightly positive returns. Funds that suffered a net loss or experienced a considerable number of drawdowns will not be considered.
Family offices are currently one of the most active investor categories in the alternative investments arena. These personal wealth management firms are flush with capital and are willing to invest in more risky opportunities. Considering the inauspicious economic environment, these investors will increase their exposure only if fund managers prove to be highly skilled and seasoned.