Family Office vs. Hedge Fund

I'd imagine less hours as you don't need to explain to investors why you're in particular stock . you also don't have to help with marketing the fund. just a guess....

comp could go either way, you remove a layer of fees and other employees, but balance against much smaller aum.

I don't know about prestige but I don't think it should matter,

just a student here with some family office experience

I think family offices will continue to grow in popularity as hedge fund regulation increases

HFs have much more prestige but you get more autonomy at family offices. I would argue for HFs though in terms of long term benefits.

I work at a family office.

Pros: Culture is probably MUCH better than that of a hedge fund. Better hours, works kinda like asset management. Really wide range of analysis you can do. I focus primarily on individual equities, however, I also do manager analysis, asset class analysis, and speak directly with big name portfolio managers regularly. A lot of autonomy and support, but be prepared to learn on your own as it's probably unstructured (HF probably have this too)

Cons: Pay is not as good. Location varies (I got short end of this stick). Probably not right in a big city as your going to be wherever the original founder wanted it to be. Unless you work for like Soros, chances are your office is unknown. I'm currently having some trouble with this given that no headhunter knows my firm or tries to poach me. Lets say lateraling out has been a huge pain, especially due to above comment regarding location.

Regarding: AUM: Average Family Office probably larger than your average HF since it takes a LOT of capital for these to make sense. Marketing: Marketing what? (this should give a clue as to how much my firm does) Direct Investing: Hopefully your firm does this or it could be a very boring time.

If this position were in a location I liked, I would NOT even remotely consider switching jobs. It's really nice and I get a lot of autonomy and it's very intellectual. Everything I say does have impact and even though pay isn't nearly as good as a top tier HF, I still am able to save a lot every year and live a comfy lifestyle. And... I don't have to deal w/ clients.

I am not going to comment on which family office I work for since these things are usually very private and hence why it's hard to find information. They take it private to stay private.

Note: Sorry about typos. Earnings season and my keyboard been having some issues.

Hi Floppity,

Thanks for your insights. Regarding exit opportunities, how are you trying to overcome the lack of brand recognition(e.g. networking strategy)? What would be your advice for fellow family office analysts looking to lateral out to hedge funds at the end of their term? Also, just out of curiosity, since you speak regularly to big name PMs, would you say they could potentially be a good recruitment source? Appreciate your comment and advice!

George,

If I remember this thread and actually find something I'll update...

For now all I can say is having a network and coming from an Ivy is helping but I wish I had more ways to connect. I don't know whether being outside of NYC or having a gpa which is slightly below the round up to 3.5 range is hurting more.

What are people's thoughts on MSD? Seems like a very top-tier fund, up there with top hedge funds, as its Michael Dell's family office that got a part of the Dell deal. How's comp, experience, etc.

Re: Biz Kid

Note: These answers relate to my firm only and each firm is diff. 1. Small team. 2. Depends. My coworkers and I personally care a lot. 3. Depends. I cannot speak to my own but I imagine it's more fixed vs. variable (relative to HF) 4. Depends. At networking events but no one at a family office goes to wine & dine w/ another for some biz mtg. 5. Not a lot but I have attended some pretty cool conferences. 6. It's a good size. 7. Depends. I developed my own (read a lot of VIC, SumZero, VII, HF/MF Letters, Blogs, PM Access, talked w/ other buy siders to get where I am now) but there's clearly a value bend here. 8. I don't trade and am actually glad that I don't. 9. No clue. I haven't cared or bothered to look. I like winning and I figure paydays will follow if I do win.

What are the most common points of entry into a family office? Out of undergrad? Or an experienced hire?

Also, what are some positions out of undergrad where you can lateral into a family office/endowment? I am assuming a Fund of Fund but was hoping to for your insight.

Thanks

LionMonkey:

It seems that family offices are increasingly investing directly in the public markets. I'm curious to get people's take on working as an equity analyst at a family office vs. a hedge fund in terms of comp, prestige, autonomy, etc.

For a noob here, can someone tell me the difference between what a hedge fund and a family office?

Some hedge funds trade to deliver alpha (probably what you're thinking about). Our traders are just for execution (aka more akin to middle office/back office) and is pretty tedious overall.

Family offices are REALLY different. The gambit of complexity runs kind of like the gambit of strategies employed by hedge funds. I know some that do individual stocks and bonds, some that only rely on outside managers, some that do both, some that do complex work w/ futures and options.

Finding these firms.... good luck. lol. They're more private than hedge funds. My firm doesn't market and neither do most of the other firms that I'm aware of (at least on a large scale). A lot of places don't even have websites...

I work for a family office and plan on using it as a base to get into B school. Not sure if I'd like to transition on to a HF or what after.

Culture is great, hours are good, pay is ok.

Get to meet with top level managers consistently. Hoping to network with them

any idea what typical comp is, e.g., for mid-level analyst, senior-level analyst, PM (or what the equivalent title would be), CIO. And, what the typical split between base / bonus / other?

This information is incredibly tough to find and would actually be pretty useful to me at the moment.

Tanuki:

any idea what typical comp is, e.g., for mid-level analyst, senior-level analyst, PM (or what the equivalent title would be), CIO. And, what the typical split between base / bonus / other?

This information is incredibly tough to find and would actually be pretty useful to me at the moment.

If it's a true, active/direct investment manager doing business as a family office (ala Soros) I would expect it to be comparable to other operations of similar scale/strategy. If not (and most are not) I don't have any great insight, but would expect it to be more in-line with fund of funds or private banking.

I think Kenny Powers provided the most accurate answer you could get. As I pointed out, even though my firm does direct equity investing, most don't.

The Biz Kid:

you can find public data for many school and endowments (Form 990-PF section 10 I believe). This has data on top lieutenants and CIO comp. I've seen around a 600mm- 3mm for CIO's at top endowments. I imagine this is lower than one might earn at private organizations that don't have to disclose this type of information.

I wonder if that's true. The article I saw on multi-million pay packages only listed people at Universities with $5+bn AUM. Not sure there are many family offices with that kind of scale. Endowment heads may also be at the sweet spot of "don't care" and "inefficient"-Harvard doesn't really have to care about public opinion unless it feels like it, and the board of trustees is probably not as interested in nickel-and-diming its advisors as the average ultra-wealthy family head.

The Biz Kid:

Not sure why it seems harder to get a baseline than even HF comp.

A lot of differentiation across family offices. Some will take a conventional FoF approach, investing across a huge range of strategies, whereas some are purely direct investing focused, virtually indistinguishable from HFs in terms of culture / comp / structure - apart from having vastly longer term capital. Most family offices are somewhere in the middle of the spectrum. In Europe at least, there are a number of family offices that are run very much like PE funds, and they are becoming quite relevant in the broader LBO market.

[quote=Kenny_Powers_CFA]

I wonder if that's true. The article I saw on multi-million pay packages only listed people at Universities with $5+bn AUM. Not sure there are many family offices with that kind of scale. Endowment heads may also be at the sweet spot of "don't care" and "inefficient"-Harvard doesn't really have to care about public opinion unless it feels like it, and the board of trustees is probably not as interested in nickel-and-diming its advisors as the average ultra-wealthy family head.

Doesn't look like they've actually slowed the pace much: For calendar 2011, HMC reported these total-compensation sums for Mendillo and the five most highly compensated portfolio managers; where the same people were among the most highly compensated HMC personnel in calendar year 2010 (reported last May), that year’s compensation is also shown (in parentheses):

Jane L. Mendillo, president and CEO: $5.3 million ($3.5 million)
Andrew G. Wiltshire, head of alternative assets: $6.6 million ($5.5 million)
Stephen Blyth, head of public markets: $6.2 million ($2.7 million)
Alvaro Aguirre-Simunovic, natural resources: $5.3 million
Apoorva K. Koticha, fixed-income global rates: $3.1 million ($4.4 million)
Marco C. Barrozo, fixed-income global rates: $3.0 million ($2.1 million)

http://harvardmagazine.com/2013/05/harvard-endowment-administrator-pay-…

HMC is very different from basically every other endowment though from what I understand.

floppity:

HMC is very different from basically every other endowment though from what I understand.

Fair, and they're the only example I've seen of with a slew of 7-figure staff, but the heads of many of the largest endowments are in that tier (like Scott Malpass at Notre Dame-go Irish)

Kenny_Powers_CFA:

Doesn't look like they've actually slowed the pace much:
For calendar 2011, HMC reported these total-compensation sums for Mendillo and the five most highly compensated portfolio managers; where the same people were among the most highly compensated HMC personnel in calendar year 2010 (reported last May), that year’s compensation is also shown (in parentheses):

Jane L. Mendillo, president and CEO: $5.3 million ($3.5 million)
Andrew G. Wiltshire, head of alternative assets: $6.6 million ($5.5 million)
Stephen Blyth, head of public markets: $6.2 million ($2.7 million)
Alvaro Aguirre-Simunovic, natural resources: $5.3 million
Apoorva K. Koticha, fixed-income global rates: $3.1 million ($4.4 million)
Marco C. Barrozo, fixed-income global rates: $3.0 million ($2.1 million)

http://harvardmagazine.com/2013/05/harvard-endowme...

I think these figures would be a lot more meaningful if we can put them within the context of the AUM and performances of the portfolios each of them manage. Do you think endowment head PMs get a bigger/less cut of the profits their divisions generates than comparable HFs?

BTW, is Scott Malpass related to David Malpass?

brandon st randy:

Kenny_Powers_CFA:

Doesn't look like they've actually slowed the pace much:
For calendar 2011, HMC reported these total-compensation sums for Mendillo and the five most highly compensated portfolio managers; where the same people were among the most highly compensated HMC personnel in calendar year 2010 (reported last May), that year’s compensation is also shown (in parentheses):

Jane L. Mendillo, president and CEO: $5.3 million ($3.5 million)
Andrew G. Wiltshire, head of alternative assets: $6.6 million ($5.5 million)
Stephen Blyth, head of public markets: $6.2 million ($2.7 million)
Alvaro Aguirre-Simunovic, natural resources: $5.3 million
Apoorva K. Koticha, fixed-income global rates: $3.1 million ($4.4 million)
Marco C. Barrozo, fixed-income global rates: $3.0 million ($2.1 million)

http://harvardmagazine.com/2013/05/harvard-endowme...

I think these figures would be a lot more meaningful if we can put them within the context of the AUM and performances of the portfolios each of them manage. Do you think endowment head PMs get a bigger/less cut of the profits their divisions generates than comparable HFs?

BTW, is Scott Malpass related to David Malpass?

On your first item, the info to answer those questions is pretty openly available for many of the largest endowments via their annual reports (AUM and returns by asset class). I am confident what you'll find is that they are receiving less per $/aum than HF managers, but that shouldn't be surprising-just like family offices (which was the genesis of this thread), endowments as a rule are closer to fund-of-funds or wealth managers than focused, alpha-generating hedge funds. Even at Harvard Management Company, probably generally accepted to be on the extreme end of the spectrum in terms of active/internal management, a large part of the mandate is to match assets to liabilities and provide cash flow to fund the endowment's spending and a significant portion of the AUM is placed with third-party managers.

Also, Scott Malpass is not related to David according to the Forbes article I found.

Kenny_Powers_CFA:

On your first item, the info to answer those questions is pretty openly available for many of the largest endowments via their annual reports (AUM and returns by asset class). I am confident what you'll find is that they are receiving less per $/aum than HF managers, but that shouldn't be surprising-just like family offices (which was the genesis of this thread), endowments as a rule are closer to fund-of-funds or wealth managers than focused, alpha-generating hedge funds. Even at Harvard Management Company, probably generally accepted to be on the extreme end of the spectrum in terms of active/internal management, a large part of the mandate is to match assets to liabilities and provide cash flow to fund the endowment's spending and a significant portion of the AUM is placed with third-party managers.

Also, Scott Malpass is not related to David according to the Forbes article I found.

Thanks Kenny. That was very helpful. I like the fund of funds analogy. It is to our benefits that the endowment funds allocate significant portions of their AUMs to alternative asset managers. They are among our most important LPs. Do you see more of these institutions acting as co-investors or participate in syndication/club deals alongside the HF/PE/RE funds?

Incidentally can you take a look at this thread and see if it makes sense: //www.wallstreetoasis.com/forums/gabe-gomez-gop-candidate-for-john-kerrys…

I posted that one earlier as I was thinking out loud after reading the Globe Article on Gabe Gomez's take home pays for his works at Advent International.

brandon st randy:

Kenny_Powers_CFA:

On your first item, the info to answer those questions is pretty openly available for many of the largest endowments via their annual reports (AUM and returns by asset class). I am confident what you'll find is that they are receiving less per $/aum than HF managers, but that shouldn't be surprising-just like family offices (which was the genesis of this thread), endowments as a rule are closer to fund-of-funds or wealth managers than focused, alpha-generating hedge funds. Even at Harvard Management Company, probably generally accepted to be on the extreme end of the spectrum in terms of active/internal management, a large part of the mandate is to match assets to liabilities and provide cash flow to fund the endowment's spending and a significant portion of the AUM is placed with third-party managers.

Also, Scott Malpass is not related to David according to the Forbes article I found.

Thanks Kenny. That was very helpful. I like the fund of funds analogy. It is to our benefits that the endowment funds allocate significant portions of their AUMs to alternative asset managers. They are among our most important LPs. Do you see more of these institutions acting as co-investors or participate in syndication/club deals alongside the HF/PE/RE funds?

Incidentally can you take a look at this thread and see if it makes sense:
//www.wallstreetoasis.com/forums/gabe-gomez-g...

I posted that one earlier as I was thinking out loud after reading the Globe Article on Gabe Gomez's take home pays for his works at Advent International.

I think university endowments doing coinvestment is the exception rather than the rule, though it does happen especially on the larger end. You also see direct equity investments in specific asset classes more than others, for example direct RE investments. Much more common to see coinvest from either FOF (more actively managed with more full-time investment professionals than a typical university endowment) or, most significantly, from major pension-type funds. This I think comes largely from the scale-for example the two Ontario-based pension funds I can come up with off the top of my head, OMERS and Teachers, have ~$175bn in AUM between the two, with OMERS (the smaller of the two) being significantly larger than Harvard at >$50bn. Note that these are not really that large as far as major pensions go-Calpers is >$250bn.

gorge772003:

Hi Floppity,

I previously asked about your recruiting process coming out of a family office. Any updates regarding that? Has anything changed regarding your views? Thanks for your insights! Appreciate it.

Same as before really. Finding something on the buy side is super difficult to begin with and not having a brand name on my resume + distance is compounding it. Getting the interview is extremely tough.

That being said, I did manage to get (on 2nd round+ at both) interviews at a top AM (listed in top AM thread) and a startup HF (started by person who previously worked at one of most well regarded value managers). It seems like whenever I get an interview in something that I like I go pretty far since I have a lot of ideas to talk about in depth. As I said before, the drawback is getting these interviews in the first place. I find a lot of top AM seem to like to hire experienced out of business school (not strictly, but they fill a part of their class from this avenue) and that hf like to work through HH'ers. NYC based HH'ers don't really want to talk to me since I don't have a BB M&A background and am not in NYC.

Sell side isn't interested in me either... but that's just a function of all my experiences including internships being buy side. To be fair, they're correct to not take me for interviews since it's probably at least somewhat accurate that I'm not truly interested.

I work on the tax & fiduciary side of a large multi-family office and can confirm that the traders and PMs here function more to execute trades and facilitate portfolios. From speaking with people (cousin is a PM here) plus what I see of our office, hours are great, culture is kindof mreh (part of a CAD bank so a little more reserved), and pay is OK. Definitely seems like a settling point for a bunch of smart guys who wanted to have kids and live in the burbs and not work too many weekends.

I guess quick update since I talked about my background/search a lot in this thread. Changed my icon to reflect where I'll be soon. Super stoked since place is investment work with a tech culture aka I could not ask for more (I will not mention anything else about the firm other than what I've written here and above, period). Won't divulge details on the job search and things I learned now but maybe I'll do a post in the future.

from April 2011 WSJ article titled "Family-Office Compensation Varies Widely", a few key quotes:

"By and large, compensation for a top executive at a medium-size single-family office is on par with that of a midrank relationship manager at a private bank."

"On average, family-office heads make about $340,000 a year, according to a Family Office Exchange survey of 180 family offices."

"Where family-office heads are pulling in $1 million or more, they’re either so effective–as money managers or as confidantes–that the family puts a premium on keeping them around."