Raising capital from family offices
Raising Capital from Multifamily Offices: Small vs Large Managers
Expert Insights on Raising Capital from Multifamily Offices
Fund managers and sponsors who want to understand how multifamily offices and RIAs screen managers before allocating.
5 key takeaways
- Direct deals can work with MFOs. One guest at a Capital Con event took a multifamily office to dinner after the Super Summit and raised $50 million. The guest said it worked because the office had a pool of clients and was open to direct investments.
- Platforms add layers of approval. Many multifamily offices and RIAs use a fund manager platform, several platforms, or an outside consultant. A manager may need to be vetted, added and research approved, which can take two or three layers.
- Size and track record thresholds. One multifamily office guest said they do not want to fall much below 100 to 150 million in AUM. They also want a four or five year track record, as evidence the manager can do what they claim.
- Small managers have a strong case. A second guest cited a study over 15 years that found small managers beat large ones by an average of 250 basis points a year. They said small managers raise less because of job risk for the allocator.
- Use big and small partners. One guest said their firm uses a large law firm, a big custodian and an outsourced due diligence tool, along with smaller niche attorneys. They apply big or small where it fits.
Summary
One multifamily office guest described a 25 year planning view and a platform of about 120 managers, mostly large and established names. The firm focuses on global asset allocation and portfolio construction of other managers. It prefers managers with at least 100 to 150 million in AUM and a four or five year track record. It also relies on large consultants to vet managers.
Another guest argued that small managers are the best place for capital. They cited a 15 year study of mutual funds that found small managers ahead by 250 basis points a year, and named job risk as the reason they raise less. The panel also covered mixing big and small service providers and keeping a family business alive instead of selling.
Key facts
- A multifamily office dinner after the Super Summit led to $50 million raised.
- One multifamily office platform holds about 120 managers across asset classes.
- A 15 year study cited in the talk found small managers ahead by an average of 250 basis points a year.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Expert Insights on Raising Capital from Multifamily Offices. 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.
In their words
"Small managers beat large managers at every single turn, in every strategy, for every time period. But the reason they don't get money is because of job risk."
"We really want to see a four or five year track record, so we have something to look at."
"I think we've gone big and small where appropriate when it comes to managers."
Related questions
- How long does a family office take to make a decision?There is no standard timeline, and I would not trust anyone who gives you one number.
- 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.
- What deal sizes do family offices typically write?There is no single typical size.
Questions about this video
What size manager does this multifamily office consider?
The guest said they do not want to fall much below 100 to 150 million in AUM. They also want to see a four or five year track record.
Why do multifamily offices often pick large managers?
One guest pointed to job risk. The guest said allocators are less likely to be blamed for hiring a big name, even if smaller managers may return more.
How many managers are on this multifamily office's platform?
The guest said about 120 managers across different asset classes. Most are large, established names.
Put this into practice with the family office fit check. See all raising capital from family offices resources.
