Raising capital from family offices
A Family Office Investor on Interest Rates, Private Credit and Cash Flow Deals
Navigating Asset Classes: Insights on Venture Capital, Private Equity, Real Estate, and More
Family office investors, private credit allocators and founders who want to hear how one investor thinks about rate risk, operators and co-investing.
The short version
A family office investor describes a portfolio built over 25 years in commercial real estate and finance. It includes about 14 commercial real estate investments, alternative investments through a hedge fund and a public ETF, an incubator with 80 million in assets, and part ownership of a bank. The speaker is cautious about private credit funds that started only about 3 years ago and have not lived through downturns.
The speaker also admits a costly miss. Rising rates in April and May of 2022 hit some consumer product and real estate holdings, and no counterbalance was in place. The next investments focus on cash flow companies that need an extra million or $2 million. The family office has also built a capital raising arm so it can bring in co-investors.
The 5 big lessons
- Ask private credit funds about downturns. The speaker often meets private credit funds that started about 3 years ago. The question is whether they have been through downturns like 1991 and have the balance sheet to withstand foreclosures.
- Treat AI as a part, not the core. The speaker likes technology with AI as one part of it. The concern is that AI can change every 3 or 6 months when another tech company arrives. They look for something built like a moat.
- Judge people, process and product. The speaker tries to run a venture style approach built on people, process and product. They favor operators who have hired, fired, raised revenue, cut costs and dealt with government issues. They also want teams that keep improving their process.
- Plan for a rate shock. The speaker missed how much higher rates could hurt consumer product and real estate businesses. The lesson is to stay more diversified and ask what counterbalances a sharp rise in rates, since rates may stay higher for longer.
- Build capital raising into due diligence. The family office cannot always write the checks. It now has a capital raising arm, and it looks at co-investing and bringing in other families.
In their words
"I look for private credit funds out in the marketplace, but I'm always nervous because they may not have the balance sheet to withstand foreclosures and the issues that come through."
"In a high interest rate market, insurance does well, lending does well, and companies with big balance sheets that have liquidity do well."
"My next investments are paying attention to cash flow companies that have gone through a bit of the mess of the last 5 years, and they're now on a next paradigm shift."
Facts and figures
- The speaker has 25 years in commercial real estate and finance.
- The family office holds about 14 commercial real estate focused investments and an incubator with 80 million in assets.
- The speaker says rates started to climb sharply in April and May of 2022, which hurt some real estate and consumer product holdings.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Navigating Asset Classes: Insights on Venture Capital, Private Equity, Real Estate, and More. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around capital raising structures, co-investment arrangements and investor eligibility rules. Do not use AI to write your own legal agreements.
Related questions
- Do family offices co-invest alongside other investors?Yes, many family offices invest alongside other investors, and they often feel more comfortable when another respected investor is already in the deal.
- How do I find the decision maker at a family office?Start by meeting the family through advisors, events and the people who manage their investments.
- What is the difference between single and multi-family offices?A single family office works for one family and is built the way that family wants.
Questions about this video
What does the speaker look for in a founder?
The speaker looks at people, process and product. They favor operators who understand hiring, firing, raising revenue and cutting costs, and who keep improving their process.
Which businesses does the speaker say do well when interest rates are high?
The speaker says insurance, lending and companies with big balance sheets and liquidity can do well in a high interest rate market.
What kind of deals does the speaker want next?
The speaker wants cash flow companies that have been through a rough last 5 years and now need an extra million or $2 million to go in.
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