At one end of the spectrum is Rockefeller and Company, which started about 130 years ago as a family office for the Rockefeller family. It opened up to other families in 1980. It has grown considerably since that time and now has close to $24 billion in assets.
At the other end of the spectrum is The Koffler Group. Terri Chernick, chief investment officer and partner, says they are considering the multi-family model. However, she highlights some issues. First, you need to find families with the same philosophy. Second, the maximum asset size needs to be addressed so as not to affect performance.
Parly Company, while at the single family office end of the spectrum, will sometimes work closely with other family offices to set up bespoke funds. Peter Fletcher, general manager of the family office, says several families pool their assets at times to set up a fund. When they work as a group, they reach substantial size. "We work with a group of 200 families from time to time, but the core group that invests in hedge funds is about five family offices."
Family offices and seeding
A growing number of family offices are seeding hedge fund managers as they see the opportunity for return potential.
Two of the three family offices that Infovest21 spoke with in the current issue of Investor Focus have seeded new managers. For example, the Koffler Group seeded EchoBridge Capital, a short fund, with $20 million in May 2008. The fund has been up about 20% since its launch. Assets now stand at $80 million.
Terri Chernick, chief investment officer and partner at the Koffler Group, says, they seed one manager or so a year and that is only if the manager meets their very high criteria. She is looking for a manager who has substantial investment experience and a true performance history that has been examined by an accounting firm. The Koffler Group will only get involved in seeding when they are early to the fund. They want to bring institutional practices to the funds’ back office.
Chernick says, “We have expertise in this area since we have been in smaller hedge funds for a long time.”
Peter Fletcher, general manager of the Parly Company in Geneva, says they’ve seeded about 25 funds. It is not a business they do but when they see the opportunity, they take it. Their criteria includes making sure the fund is run like a business.
Family offices as seeders are different from most industry seeders. Chernick points out that unlike most seeders, they are willing to invest for the long term. Fletcher says they don’t become shareholders. Rather, in many instances, they take the carried interest or they manager charges them reduced fees.
Other families have also seeded hedge funds in the past year. To name a few:
The Family Office Co, the Bahrain-based multi-family office, seeded 3 Sigma Value Offshore in September.
London-based Iveagh, the investment office of the Guinness family which made its fortune in brewing and which was established as a family office in 1886, also seeds hedge funds. Under a deal that was disclosed in April, Iveagh became a minority shareholder in 47 Degrees North and provides seed capital for new launches for emerging managers and innovative strategies.
Last year, Iveagh agreed to invest in Triple A Partners which provides seed capital to alternative investment managers in Asia.
Excerpt from the just released issue of Investor Focus – Single vs Multiple Family Offices
Issue also includes:
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