Infovest21 Survey: 80% of family offices view hedge funds favorably

During May and June, Infovest21 interviewed 30 family offices to get their thoughts on hedge funds and funds of funds.

The survey provides a snapshot look at the typical family office organization in today's environment. We were particularly interested in how the events of 2008 may have impacted their views on hedge funds and funds of funds.

Lois Peltz, president of Infovest21, summarized some of the highlights:

Hedge Fund/Fund of Funds Allocations
➢ On average, the family offices allocated about 32% of their portfolio to hedge funds, up from 25% in 2009.

➢ The average allocation to funds of funds fell slightly to 8.98% in 2010 from 9.02% in 2009.
Views on Hedge Funds

➢ One-third of family offices surveyed viewed hedge funds "very favorably" while 47% viewed them "somewhat favorably." Meanwhile, 17% were neutral and 3% view hedge funds negatively.

➢ After the financial turmoil of 2008, almost 60% of the family offices found hedge funds more correlated to markets than they had previously thought.

➢ Family offices were evenly divided on hedge funds' main function. Almost one-quarter said hedge funds' main function was diversifying a traditional portfolio while the same percentage said hedge funds provide absolute returns. Another 20% said hedge funds provide uncorrelated returns to traditional investments.

Manager Selection
The three most important selection criteria cited in manager selection were performance, reputation and experience.

Asset size was not a criteria for over 40% of the family offices while 9% said it depended on the strategy.

Strategies Allocated To
Over 80% of the families allocate to equity long/short. Distressed, event driven and global macro were the most allocated to strategies.

Fees
The average fee structure paid to a hedge fund was 1.5% management fee and 18.3% incentive fee. To funds of funds, the average management fee was 1.2% and 9.2% incentive fee.

60% of the families said the fees were about the same as last year while 30% said they are paying a lower management fee and 30% said they are paying a lower incentive fee.

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Excerpts from Infovest21's Family Office Survey: A Snapshot Look at Today's Family Office

Topics covered:

*Views on hedge funds/funds of funds
*Manager selection criteria
*Hedge fund/fund of funds allocations
*Strategies used
*Terms
*Use of managed accounts
*Concerns
*Comparison:Single family office vs multiple family
*Profile of respondents
*Assets under management

Approx 25 pages including graphs and tables. $500