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A Q&A

 

with Angelo Robles

Angelo Robles is the founder and CEO of the Greenwich CT based Family Office Association (FOA), an exclusive global membership organization that delivers proprietary thought leadership, research, best practices and global programming to multiple generations of exceptionally wealthy families and the professionals who run their single family offices (SFOs). Angelo is also the founder of Effective Family Office, a single family office think tank and masterclass program. Angelo is the author of the soon to be released book, “Effective Family Office: Best Practices and Beyond.” Angelo is the host of Angelo Robles’s Effective Family Office Podcast on iTunes and iHeart Radio. Angelo personally advises a small number of global families and SFO executives on improving results. Angelo’s expertise has been sought by media outlets such as Bloomberg Radio and Television, the Wall Street Journal, Forbes Blog and Institutional Investor, among others. Angelo continues to lead in the SFO community with creative proprietary thinking and resources on the future of the family office.

Family Office Investing

Q. What trends do you see within the Family Office community as it relates to investing?

A. Well Geoff, as you have heard me say on countless occasions, if you know one single family office, you know one. Each family office is unique and each is going to have its own investment philosophy and set of objectives. It may be a bit simplistic, but in general, family office investment goals fall into one of two camps: wealth growth and wealth preservation.  Some family offices take advantage of their base of capital and use their deep Rolodexes and broad experience to grow family wealth. Others are more focused on wealth preservation.  A wealth creator that has set up an SFO may want to be very hands on, very active, and could still be in growth mode. A multi-generation family office could strictly be focused on preserving the wealth for generations to come. But as I mentioned, each Family Office is unique.

Families that are preserving wealth are generally going to believe in the concept of the “endowment” model. They believe in creating an investment policy statement, developing a plan for strategic or tactical allocation, and then executing that plan. They believe in picking best in breed managers and effectively managing the managers. I would say that is going to be the most common way that most family offices are going to invest.

On the other side, you have more of a “direct investing” model.  That could mean direct investing into public securities themselves or investing in privates.  This involves building an internal team inside the single family office. The challenge is building this team and that takes time, that takes money, and that takes having the right talent and resources. Families have to ask themselves if they going to have the capability of building, managing, and developing culture within a team.

Hedge Funds

Q. Are family offices still active investors in the Hedge Fund sector?

A. When I launched the Family Office Association in 2008, many families had LP investments in hedge funds, and ten years later, many still do. However, the percentage of families with hedge fund exposure has declined from 2008 levels, and many families that do invest in Hedge Funds allocate a smaller percentage of their portfolio to this asset class. I would estimate that probably 40% to 50% of Ultra-High Net Worth families still have some exposure to Hedge Funds.

As with the rest of the LP community, families have shifted to a more robust manager selection and vetting process. There is also an expectation of lower risk and higher returns than there had been previously. Families are also looking for better transparency, but there is a realistic expectation of what they may be able to see.  To sum it up, there still is interest, but it is more selective.

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Private Equity & Venture Capital

Q. How do families currently perceive investments in Private Equity and Venture Capital?

A. Interest in Private Equity and Venture Capital is probably greater than in hedge funds, simply due to return. Direct and co-investments in private companies are also attractive for a family office.  However, as mentioned earlier, it requires a large amount of effort to be an active investor in private deals.

Most families will dabble a little bit in direct investments but will look for managers for active investing. Larger family offices will most likely spend between $10-$20 million or more on building an initial team to be active direct investors when they are playing in the multibillion dollar area. I expect this trend to continue.

Smaller families are definitely going to be more active as LPs. So yes, there is an increased appetite for this risk basket.  The investment rationale for families is that they are looking for a return of 300-500 basis points more than standard benchmarks. These larger returns should, over time, justify the risk of illiquidity.

Co-Investing

Q. Are Family Offices interested in Co-Investing?

A. Yes. I would say that for many families, it is of great interest. Through co-investing, family offices are utilizing the sourcing and diligence talent inside of a venture or private equity firm. When evaluating an LP position, a family office may not only be looking for a fund investment, but it may also be looking to potentially work with that fund manager as a direct co-investor. 

This structure enables family offices to get some of the benefits of pure direct investing without a highly expensive and sometimes difficult to manage internal team. This is especially important as family offices look to streamline, leverage technology, and be not only more efficient but more effective.

So again, some very large family offices are onboarding talent and building teams, but that is difficult. When they can get direct exposure where a fund manager is doing 99 percent of the heavy lifting, then that is something that can be very attractive.

Crypto & Blockchain

Q. What is the investment rationale for Family Offices in Blockchain and Crypto?

A. Investors are attracted to the Blockchain/Crypto space because they feel that it is early stage, like the Internet might have been 30 years ago.  They assume that there will be some big winners but there will also be some losers. Many single family offices are actively investing or at least taking a serious look.

Q. Has investor interest in Blockchain/Crypto accelerated or decelerated over the past two years?

A. From my experience I would say it is a notch or two lower than it had been, but there definitely is interest again, especially in a time when accomplishing real alpha is perceived to be difficult. I think it is getting harder and harder with public securities, without using extreme concentration or leverage, to get “outsized” returns, so other strategies are looking more attractive.