Monday, November 16, 2009

Excerpt from Infovest21 Investor Focus: Family Office Advisors - Consolidation of multi-family office groups

Threshold Group, a wealth management and family services firm headquartered in Gig Harbor, Washington, and Ashbridge Investment Management, a Philadelphia-based family wealth management office, announced in mid-October that they have signed a letter of intent to create a single, independent and family-owned wealth services firm for families under the banner of Threshold Group. The combined entity will have assets of about $2.25 billion.

"The combined entity will benefit from added depth, enhanced service teams and in some cases, reduced distance between client households and relationship managers, said Tim Cavanaugh, vice chairman of Threshold. Threshold’s New York City office will be consolidated in Philadelphia. Its Portland, Oregon office will continue to operate as a client service site.

The combined entity will continue to focus on comprehensive investment advisory services and an integrated range of family office services including financial and tax planning, estate planning, budget and cash flow management, wealth education and family governance.

Threshold, which began in 1999 as a single family office for George and Jane Russell, expanded to other families in 2004. Its current assets under advisement are $1.5 billion. Ashbridge, which has served as the family office for the Grace family in Philadelphia for five generations, has assets of about $750 million. Charlie B Grace Jr, Ashbridge chairman, said, both organizations were independently founded and owned by successful families. “Both our firms have first-hand understanding of families and both have been advocates of purely advisory, open architecture services. Together we have the chance to create broader professional capabilities for our clients and continued sustainability for the longer term.”

Open architecture

As with Russell and Ashbridge, the three firms Infovest21 interviewed in its current issue of Investor Focus – Alpha Capital Management, Hillview Capital Advisors, and The Commonwealth Group - all practice 100% open architecture.

100% open architecture means than 100% of the advisor’s fees comes from clients based on a percentage of assets under management. In some cases, they don’t manage money internally and therefore don’t have conflict of interests with their clients. However, some manage internal funds of funds for their clients.

Moving toward established managers, multi-strategy funds and managed accounts
Other common threads among the family office firms interviewed in this issue are that they are moving away from newer, less established managers and toward established managers with deep teams and deep resources.

A preference seems to exist for multi-strategy managers so that the managers can move capital quickly between strategies and assets. As Bradley Alford of Alpha Capital Management points out, “We now realize it is just not possible [for us] to move around quickly given lockups, quarterly to annual redemptions, long notice periods and gates.”

Some of the family office firms and advisories prefer using managed accounts so “we don’t have to worry about gates, fraud, excessive risk, excessive leverage which makes us sleep better at night,” says Alford.

Despite the advantages of managed accounts, the families mention their higher fees, not all top managers are accessible, and not all strategies are appropriate.

Excerpt from Infovest21\'s September Issue of Investor Focus – Family Office Advisors

  • Interviews with Alpha Capital Management, Hillview Capital and Commonwealth Group.
    Issue also includes:
  • Who’s Who: Family offices and advisors
  • Sidebar: Hedge fund distribution platforms
  • Sidebar: Tax treatment for family offices
  • Statistics: Single family offices and multi-family offices
  • Quarterly sentiment indicator: marketers
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    • Chicago Teachers 10.3
    • Federal Reserve Employees 10.1
    • Idaho Public Employees 9.9
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    • New York State Deferred Comp 9.8
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    • Delaware Public Employees 7.1
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    • Target 6.3
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    • Source: Pensions & Investments, as of Sept 2008