Infovest21’s just-released family office survey provides a snapshot look at the typical family office organization in today’s environment. About 60% were single family offices while 40% were multiple family offices. The family offices were primarily US-based. The average asset size of the typical family office was $2.2 billion. The interviews took place during July.
Among the highlights are:
Hedge Fund/Fund of Funds Allocations
• On average, the family offices allocated to 23 hedge fund managers.
• On average, family offices allocated about 26% of their portfolio to hedge funds.
• The average allocation to funds of funds was quite small at 1.0%.
Views on Hedge Funds
Lois Peltz, president of Infovest21, commented: “Almost two-thirds of the family offices viewed hedge funds “very favorably” while 20% viewed hedge funds “somewhat favorably” while 8% were neutral and 4% viewed hedge funds negatively.”
She added: “Family offices were also divided on their views of the current hedge fund environment: Almost 40% of the families said few investment opportunities existed while 31% said many investment opportunities existed. 23% said excellent talent was available while 15% said talent wasn’t available.”
Manager Selection and Strategies Allocated To
The three most important selection criteria cited in manager selection were performance, experience and reputation.
About 46% of the families allocate to equity long/short, distressed, and event driven. About 42% allocate to emerging markets.
Over 30% of the typical family offices’ portfolio is allocated to managers with assets between $500 million and $999 million. Another 25% is allocated to managers with assets between $100 and $499 million while 18% of the managers have assets below $100 million.
Fees
The average fee structure paid to a hedge fund was 1.6% management fee and 18.9% incentive fee. The average management fee and incentive fee for funds of funds was 1.0% and 7.8% respectively.
Almost 60% of the families said the fees have stayed the same compared with last year while 20% said they are paying a lower management fee and another 20% said they are paying a lower incentive fee. Another 20% said they are paying higher management fees and another 16% are paying higher incentive fees.
Almost half of the family offices say they have not been able to negotiate favorable terms with managers.
Family offices’ largest concern with hedge funds is managers making up their own rules.
Single versus Multiple family office responses
A number of significant differences can be found when comparing single family offices responses with those of multiple family offices. Some highlights include:
• Single family offices have more experience with hedge funds as seen in terms of years investing with hedge funds.
• Multiple family offices are larger proponents of hedge funds than single family offices.
• For single family offices, performance is the most important criteria in selecting a manager. However, for multiple family offices, experience is the key component
• Very little overlap exists in the strategies that the single and multiple family offices are considering for the first time. Global macro was cited by 20% of the single family offices while the largest percentage of multiple family offices, 38%, cited emerging markets.
Showing posts with label fees. Show all posts
Showing posts with label fees. Show all posts
Sunday, August 28, 2011
Monday, July 12, 2010
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
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.
********
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
Tuesday, May 18, 2010
Infovest21 White Paper: It’s all about terms – not fees
Generally, hedge fund attorneys and accountants haven’t seen a drastic change in hedge fund fees over the past few years. “There has been a scaling back of management fees when assets get to a certain level. I hear about it in individual cases but I’m not seeing in large amounts. I’m not seeing slippage on fees unless the manager can’t raise assets. It’s all about terms. Institutional investors are pushing managers on terms,” says Michael Gray, an attorney at the Chicago law firm of Neal Gerber Eisenberg LLP.
The world has increasingly become bifurcated in the manager community between “the haves” and “the have-nots.” George Mazin, partner at Dechert observes, “The haves” – those managers that have plenty of assets – can have all they want. “The balance of power has shifted back to “the haves.” They are less conciliatory and less willing to make deals. The “have-nots” continue to struggle to raise assets and will be a lot more flexible.”
Major institutional investors continue to drive hedge fund investments. The most demanding investors are clearly the state plans. The rest of the institutional community takes their lead from the state plans.
Ricardo Davidovich from Tannenbaum Helpern Syracuse & Hirschtritt LLP
agrees. “The investor is demanding better terms in exchange for their big ticket. The investments are being negotiated more than in the past. The institutional investor is looking more like seeding deals.”
“Hedge fund documents are definitely moving toward the LPs’ favor but good managers can still command the best terms. It’s on a deal-by-deal basis,” adds Gray.
While hedge fund documents have become more balanced [between investor and manager power] than three or four years ago, they still lag behind private equity fund documents which are more balanced than hedge fund documents, observes another attorney. “Private equity documents have investor driven provisions as investors are in private equity funds for a longer time period. The more institutional investors are driving the terms,” says Irwin Latner of Herrick Feinstein.
In its current white paper, Infovest21 explores the trends in terms from different perspectives – case studies of institutions, some managers designing product to meet institutional investor demands, investor surveys and interviews with attorneys and accountants (who represent diverse manager bases by asset size, client base and geography) who prepare manager documents.
Some specific trends are evident, such as:
Gates – Most funds have gates. The trend is toward increased use of investor-level gates. Gates are strategy dependent.
Lock-ups - Some managers will give concessions on the incentive fee in exchange for longer lock-ups. With a two to three year lock-up, the investor may pay a 15-18% performance fee.
Strategy is again an important factor. Funds that are longer term focused will lock up investors longer. Funds that are trading-oriented by nature are less concerned on the lock-up side.
In Kind Distribution - The documents are being more specific on what can be done to satisfy redemptions. Documents are specifically addressing redemptions in kind, suspensions etc. These actions were taken in 2008 and 2009 on the assumption that managers had the right to do it. Now it is being written into the documents.
Side Pockets – Some funds are without side pockets if they’re invested in very liquid assets. Some funds have stricter rules on side pockets e.g. if the manager is going to side pocket something, they must do so within a specified time of buying the position. Some funds have modified side pockets - the net effect is that a fund can side pocket an investment but it will not lower the high water mark/carry loss forward. More information is disclosed in their documents.
Fees and Expenses - Most attorneys and accountants preparing hedge fund documents say fees haven’t changed significantly in the past few years i.e. they are not seeing a change in industry standards. There has been some increased flexibility, more attention to hurdle rates and high water marks, and some customization but not any wholesale change.
Some managers have attracted new assets by carrying over high water marks i.e. no incentive fees are charged on new capital until all losses on old capital have been recovered from old capital profits.
Some have also carried over high water mark to other affiliated funds including funds with different strategies.
Excerpt from:
Infovest21 White Paper: Trends in Fund Terms
*Balance of power/alignment of interest
*Case studies: select managers designing product to meet institutional investor needs
*Gates, lock-ups, in kind distribution, side pockets, most favored nation, key man provision
*Fees and expenses
*Funds of funds and seed capital
20+ pages including graphs and footnotes
Advance Price; $450 through May 23. Thereafter: $500
For additional information, call 212 686 6440
The world has increasingly become bifurcated in the manager community between “the haves” and “the have-nots.” George Mazin, partner at Dechert observes, “The haves” – those managers that have plenty of assets – can have all they want. “The balance of power has shifted back to “the haves.” They are less conciliatory and less willing to make deals. The “have-nots” continue to struggle to raise assets and will be a lot more flexible.”
Major institutional investors continue to drive hedge fund investments. The most demanding investors are clearly the state plans. The rest of the institutional community takes their lead from the state plans.
Ricardo Davidovich from Tannenbaum Helpern Syracuse & Hirschtritt LLP
agrees. “The investor is demanding better terms in exchange for their big ticket. The investments are being negotiated more than in the past. The institutional investor is looking more like seeding deals.”
“Hedge fund documents are definitely moving toward the LPs’ favor but good managers can still command the best terms. It’s on a deal-by-deal basis,” adds Gray.
While hedge fund documents have become more balanced [between investor and manager power] than three or four years ago, they still lag behind private equity fund documents which are more balanced than hedge fund documents, observes another attorney. “Private equity documents have investor driven provisions as investors are in private equity funds for a longer time period. The more institutional investors are driving the terms,” says Irwin Latner of Herrick Feinstein.
In its current white paper, Infovest21 explores the trends in terms from different perspectives – case studies of institutions, some managers designing product to meet institutional investor demands, investor surveys and interviews with attorneys and accountants (who represent diverse manager bases by asset size, client base and geography) who prepare manager documents.
Some specific trends are evident, such as:
Gates – Most funds have gates. The trend is toward increased use of investor-level gates. Gates are strategy dependent.
Lock-ups - Some managers will give concessions on the incentive fee in exchange for longer lock-ups. With a two to three year lock-up, the investor may pay a 15-18% performance fee.
Strategy is again an important factor. Funds that are longer term focused will lock up investors longer. Funds that are trading-oriented by nature are less concerned on the lock-up side.
In Kind Distribution - The documents are being more specific on what can be done to satisfy redemptions. Documents are specifically addressing redemptions in kind, suspensions etc. These actions were taken in 2008 and 2009 on the assumption that managers had the right to do it. Now it is being written into the documents.
Side Pockets – Some funds are without side pockets if they’re invested in very liquid assets. Some funds have stricter rules on side pockets e.g. if the manager is going to side pocket something, they must do so within a specified time of buying the position. Some funds have modified side pockets - the net effect is that a fund can side pocket an investment but it will not lower the high water mark/carry loss forward. More information is disclosed in their documents.
Fees and Expenses - Most attorneys and accountants preparing hedge fund documents say fees haven’t changed significantly in the past few years i.e. they are not seeing a change in industry standards. There has been some increased flexibility, more attention to hurdle rates and high water marks, and some customization but not any wholesale change.
Some managers have attracted new assets by carrying over high water marks i.e. no incentive fees are charged on new capital until all losses on old capital have been recovered from old capital profits.
Some have also carried over high water mark to other affiliated funds including funds with different strategies.
Excerpt from:
Infovest21 White Paper: Trends in Fund Terms
*Balance of power/alignment of interest
*Case studies: select managers designing product to meet institutional investor needs
*Gates, lock-ups, in kind distribution, side pockets, most favored nation, key man provision
*Fees and expenses
*Funds of funds and seed capital
20+ pages including graphs and footnotes
Advance Price; $450 through May 23. Thereafter: $500
For additional information, call 212 686 6440
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