Investment Strategy for Family Office

Investment Strategies for Family Office

It has become a global trend wherein affluent families set up family offices to coordinate and manage their wealth. There are SFOs (Single Family Offices) and MFOs (Multi-Family Offices). Single Family Offices can be understood as private companies designed to cater to the interests of one family or related family group. On the other hand, MFOs cater to the interests of multiple client families.

The objective of a family office is to create a customized investment plan for their current and future generations. While planning family office investments, the interests of the individual members of the family should be taken into account.

Investment strategy for family office is determined based on:

  • Impact of the investment strategy on their time and personal privacy
  • The extent of regulatory oversight and Governmental scrutiny
  • Operating budget

The investment strategies for family offices that have become popular in the recent times are:

Direct Investments:

Family offices are opting for direct investments instead of private equity funds which was popular some time back. More families are taking risks and buying out large stakes in companies and acquiring companies. This allows families more transparency and better control on investments. However, many a time, family offices do lack the necessary resources to analyze the best investment options. This has led to the growth of co-investments in family offices.

Co-investments:

It is a means of investment when a minority investor links up with a large investor for investing in a company or transaction instead of investing in a private equity firm. Trends indicate that co-investments are on the rise. This type of investment benefits the minority partner as he benefits from the larger investor’s expertise.

Opting for private equity instead of hedge funds:

Although it is seen that family offices prefer direct investments, they are not withdrawing from private equity completely. They are opting for private equity over hedge funds. The reason for this can be attributed to the poor performance of hedge funds in the past few years. The other factors that are driving investors away from hedge funds are their high transaction fees and increased governmental regulations.

Impact Investing:

Impact investing has become increasingly popular among the younger generations. It is essentially a type of investment that provides good returns while also serving social causes.
Although these are some of the most sought-after investment strategies for family offices, family offices still believe in parking their funds in traditional investment options such as real estate, precious metals, etc.

If you are considering investing in a family office, it is recommended that you select a manager who is qualified and experienced. Greg Silberman is an experienced financial consultant who has been successfully managing family offices for years. He has been suggesting investment strategies to them after studying the market conditions and the investment trends.