Family Offices Adjust Portfolios on the Fly
Family offices are among the most sophisticated investors in the world. Operating free from investment committee and policy meetings that can slow due diligence and delay important shifts in asset allocations, family offices have the unique ability to remain extremely nimble on behalf of their discerning clientele. Lately, this category of investor has begun increasing its percentage of total assets in hedge funds in hopes of mitigating its risk should there be another dip in equity markets.
A Zurich-based multifamily office took steps in recent months to boost its hedge fund investment to 35 percent of its portfolio from 20 percent. The firm added two new hedge fund managers in October and another nine in November.
A New York-based multifamily office managing an internal fund of hedge funds anticipates the addition of five new funds in the first quarter of 2010, with initial subscription amounts ranging from $2 million to $10 million. The firm’s open architecture allows it to invest in as little as six weeks after initial introductions.
Another multifamily office in New York has a more opportunistic approach but firmly expects to make new hedge fund investments in the beginning of 2010. The head of manager research and selection noted a preference for traditional strategies, such as long/short equity, global macro, distressed, and event driven. Based on its substantial initial allocations, the group requires funds with at least $300 million under management.
Investors wary of a pullback in equity markets are moving quickly to select high-quality hedge funds that have demonstrated prudent risk management in recent years. Family offices, revered for their quick action and long-term investment horizon, should be an important focus for hedge funds as institutional capital continues to be somewhat deliberate.