Raising capital from family offices
What Family Offices Want From Private Equity Fund Managers
What are Family Offices Looking for in Private Equity Fund Managers
Private equity fund managers and capital raisers who want to understand how family offices judge a fund before they commit money.
What you will hear
Capital preservation comes first for family offices evaluating private equity fund managers, according to Richard C. Wilson. Speaking from Geneva, Switzerland, he condensed an hour-long talk into a short list of what matters. Family offices are often run by entrepreneurs who know how to make money. In Richard's experience, they do not want to lose principal, and they weigh that above taxes, high growth or a new exciting idea.
Two other points follow. Family offices want a credible, well-known, professional team, and adding recognized names can help a manager get meetings. They also complain that fund managers ignore them, since many managers court pension funds and endowments writing much larger checks. Richard says extra service, steady reporting and direct answers can lead to loyalty and referrals to other families.
The 5 big lessons
- Capital preservation comes first. Family offices rank not losing money as the top concern. They care about it more than taxes, high growth or a new exciting idea.
- Show how the portfolio is defended. When explaining strategy, managers should cover how their deal sourcing protects the portfolio. Richard points to avoiding auctions and overpaying for private companies.
- Build a credible, known team. Family offices want consistent, reliable, professional managers. Adding well-known people, such as former executives of large banks or private equity firms, can help in getting meetings.
- Understand why family offices feel ignored. Richard says many fund managers target pension funds, endowments and foundations because those can often write checks of 20, 30 or 50 million or more. Family offices often allocate 3, 5 or 10 million, so they may get less attention.
- Service after the investment matters. Family offices want consistent reporting and a senior contact who can answer questions by phone. Extra service can bring referrals to other families and longer loyalty.
Worth quoting
"Capital preservation is the number one and number two most important thing that family offices care about. They don't want to lose their money."
"If you give extra service and provide extra lesson and extra help and resources to these family offices, they might refer you to other families and stay with you longer."
"Always follow up, always follow through, and actually give direct answers, complete, concise, quick answers, when a family office needs something that you're working with."
From the source
- Family offices often allocate 3 million, 5 million or 10 million to a fund, and sometimes 1 million or less.
- Pension funds, endowments and foundations can invest 20, 30 or 50 million at a time, which is why many fund managers favor them.
- Richard C. Wilson cut an hour-long speech into a two-minute summary of what family offices look for in private equity fund managers.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: What are Family Offices Looking for in Private Equity Fund Managers. 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.
Related questions
- 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.
- Do family offices invest in funds or only direct deals?Family offices do both.
- What deal sizes do family offices typically write?There is no single typical size.
Questions about this video
What matters most to family offices when investing in private equity?
Capital preservation is the top concern. Richard says family offices care about not losing principal more than taxes, high growth or a new exciting idea.
Why do family offices say fund managers ignore them?
Many fund managers focus on pension funds, endowments and foundations that can invest 20, 30 or 50 million or more at a time. Family offices often allocate 3, 5 or 10 million, or 1 million or less, so they get less attention.
How can a fund manager keep a family office as an investor?
Richard recommends consistent reporting, a senior person assigned to the account, close notes and direct, quick answers. He says this extra service can lead to referrals and longer loyalty.
Put this into practice with the family office fit check. See all raising capital from family offices resources.
