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The Problems Hedge Funds And PE Firms Have Connecting With The Super Rich And Single-Family Offices


Added on 11/07/2018

(Forbes) -- The world of the super-rich (net worth = $500 million or more) and their single-family offices is expanding at a tremendous rate. This growth correlates to the increase in the growth of extreme wealth. What is very telling is that a large percentage of the super-rich are highly motivated to grow their already Croesus fortunes. To do so many of them are investing in alternatives such as hedge funds and private equity funds.

“The appeal of alternative investments is very strong among single-family offices,” says Angelo Robles, founder and CEO of the Family Office Association and author of Effective Family Office. The complication is that a good number of hedge funds and private equity funds are not very good at connecting with single-family offices.”

According to Usha Bhate, a leading international authority on single-family offices, “To be successful working with single-family offices requires alternative managers to first be able to reach them. Considering that many single-family offices and super-rich families go out of their way to be unreachable, without a strong network among single-family offices, this can be a major obstacle. Then, the alternative managers need to be able to explain their offerings in ways that resonate with the ultra-wealthy. This also proves to be problematic for many alternative managers. However, it certainly is possible to effectively frame offerings in ways that motivate the super-rich.”

For those hedge funds and private equity firms that are seeking to raise capital from the super-rich, it is critical to really understand their worlds. “The difference between institutional investors and family office investors is tremendous,” says Peter Sasaki, managing member of CGS Associates. “Thinking the same approach or the same people can be very successful with both groups is usually a serious mistake. What is required is experience and insights into how single-family offices make investment decisions, and it is often not an exclusively rational process.”

The super-rich are investing billions of dollars into hedge funds and private equity funds. Moreover, they are looking for new alternative opportunities. For alternative managers seeking to capitalize on this scenario requires connectivity and an in-depth knowledge of the single-family offices.