Skip to main content

The Investment Needs of Family Offices

Many investors want to gain access to family office investors.  After working with the large institutions and real estate private equity funds I can personally tell you that the family office marketplace is distinctly different.   Believe it or not it is more similar to the retail market than it is the institutional market.

I can't tell you how many times that I have sat at a conference listening to a sponsor pitching their deal.  I feel that I am pretty smart and understand alot of different strategies and structures but I can't tell you how many times I have listed to a sponsor talk about their strategy and my eyes would start to glaze over because they were speaking as if it was a foreign language.  The first thing I think of is "the sponsor has no idea of their audience" and this is something I have not seen only once but many times.

For example, one time I was at Family Office Association event and one of the sponsors was in front of the room going over her presentation.  It was obvious that she was very intelligent and that she knew what she was talking about but it was also obvious that no one could understand what she was saying. The Family office space is made of up of a patriarch or a family that made their money in a specific industry. They may have spent 30 or 40 years building their business while focusing on that one business. In fact, 90% of the time their whole net worth was tied up in that business until their exit event. These are very very intelligent people however their expertise was in one specific area.

The best thing a sponsor could do would be to break down what they're doing, what they're trying to accomplish and to do so in a manner that is very simple and easy to understand. By doing this it will bring up additional questions but now you're in the position to be able to answer those in a manner and in a way that your audience will start to understand. Know your audience and be aware of your surroundings. 

Great ideas come every day but if no one can understand what your trying to say, then that is what it will remain. A great idea.

Comments

Post a Comment

Popular posts from this blog

Harvard's Endowment commits to a target investment range into real estate between 10% to 17% for 2016

Years ago, before the downturn I was paying very close attention to the investing allocation of my Alma Maters Endowments Investing Strategy HMC (Harvard Management Company), especially in the area of real estate.  I believe that not only was Harvard a great place to understand the importance of investment allocation strategies before the downturn but even more so since the downturn. In fact, investors who are looking to enhance the performance of their investment portfolios probably won’t find a better investment model than the one used by the $37.6 billion endowment for Harvard University. The entity in charge of managing the endowment, Harvard Management Company (HMC), has accrued an impressive investment track record across its 41-year history. As of fiscal year 2015, the endowment had produced an average annual return of 12.2% – 290 basis points higher than the average 9.3% return of a typical U.S. 60/40 stock and bond portfolio. The methodology behind HMC’s success is th
1 comment
Read more

Real Estate Analysis

Just a little while ago myself and my patriarch sat down with another family and began discussing real estate and our strategy.  As the family office really didn't understand real estate, they started to ask questions on how we looked at deals and evaluated opportunities. Thinking back I think that a lot of the questions came from the fact that they created their wealth in the LBO market and thus understood the different nuances of businesses.  Now many families created their wealth from a business but this particular family was involved in 39 different industries, thus I believe their frame of reference was a little different. Our family office created their wealth in real estate and one big part of that has to do with the degree of analytics that is used in our office.  In fact, I have been asking for about 10 years why people are not more analytical about real estate decisions.   All too often a family office is approached by real estate funds or operators because they work
Post a Comment
Read more

So you want money from a family office huh?

A lot of people want to access the family office market . The reason is because they believe that it's an area which they can raise a lot of capital and often in a manner that is much easier. Although the check size might be bigger there's many many things that people don't realize when dealing with a family office.  In my past I had the ability to raise capital from individuals to family offices to private equity funds, insurance companies and institutions. The biggest difference with institutions or institutional capital is that their decisions are typically made based upon parameters. They have a box or boxes in which they are to invest into. In addition, it's not their own money so because of that they are often removed from any emotions. Sure they want to do a good job but let's face it its not their own money!!  Family offices, however are different. I would say that family office investors are much more like individual investors. In many ways very si
Post a Comment
Read more