Would you work for a family office?
WSO Family Office Database; check it out here
3 years into my current gig at an equity L/S fund (started out of undergrad) that's getting hit with redemptions so I'm looking to get out ASAP. I am weighing a few options at the moment:
(i) MM PE associate, 2 funds with total AUM 500MM-1B range. Good comp package offered and solid team but not much of a track record of exits yet.
(ii) Family office of successful investor/entrepreneur. Small team (PE option.
(iii) MF PE associate, process ongoing--no offer yet.
Would like to hear some thoughts on the relative merits of these options, especially on #2.
Related Resource: WSO Family Office Database
Option 2 sounds pretty nice... (I'm biased and never did PE though).
-No worries about capital redemption -Get to work for a guy that has clearly been successful -Probably not an up or out model -Mentorship and the founder probably has a great network.
Follow how Eddie Lampert got started with Richard Rainwater and all of the people that tie back to the Bass family. Its informative.
Thoughts from a guy at a family office:
There will be less deal flow. The incentives on deals are different at a family office than at a PE firm. The family office isn't getting management fees on capital deployed so they're much more selective on what they buy and tend to be cheaper in auctions too. Prepare to bid a lot and not ratchet up offers.
Conversely, because there are no requirements to exit due to fund lifetime constraints, you're much less likely to get divestment experience as well. If the founder doesn't like the valuations he's seeing, then prepare to sit tight.
I can't speak for the founder, but if he's very involved in deals, prepare for a "my way or the high way" approach to investing. Generally speaking, if someone is successful enough to have $1B of capital to invest, they know what they're doing and generally don't give a shit what some associate with FO.
So in summary, a family office will offer perks to a traditional PE firm (ie. lifestyle and competitive comp.) but you'll likely get less deal experience and the office dynamic will be heavily dependent on the founder's style. If you like the "corporate" feel of bigger firms, a family office is not for you. Furthermore, you will never run the show at a family office. The highest step you'll ever reach is being the founder's right hand man.
Coming up on three years at a family office now. Founder made their money running a HF in Asia for 10+ years and was previously at BB banks in US/EU beforehand. AUM ~$300M USD Just to echo the above:
Strong Personality: 100% agree with the above with regards to "my way or the high way". You have to earn the trust of the Founder for him to even give you an ear, let alone listen to investment advice, allocation, strategy. It's taken me 3 years to get to the position where I have relative discretion on investment amount(s) in deals. When it comes to investment team's sourcing vs. Founder's sourcing, he will always disregard ours becauase it isn't "his strategy" which can vary year to year.
Mentorship: He will coach everyone individually, and genuinely take an interest in your career, life and will help you in anyway he can. E.G. In the beginning he'd ask what sectors or transaction types I want to focus on, and make sure I got that exposure (pretty sure the VPs at the time hated hand holding me).
Helping out outside of work: The Family Office I work for are more than just coworkers. Some guys have been here 10+ years, and they want to ensure a healthy culture, which includes showing that they care. If I have problems outside of work or my family does, my coworkers here will leverage resources to solve the problem. E.G. my brother works in financial journalism covering some pretty archaic topics, I mentioned it to the Founder and he happily put him in touch with PMs at other buyside funds covering this topic. I have countless examples of this!
Deal Flow: This will depend on the founder, we are based in Asia, but invest all over. Think of Lead Investors in Series C for technology companies, seed rounds for medicinal marijuana, financing/M&A opportunities for our portfolio companies in Asia/USA. We also partner with institutions on some investments. I will say that the level of DD on some deals is far below what would be expected in traditional PE, but other sometimes easily on par.
Career Track & Exit Opps: I made VP a few months ago and will consider staying here for the foreseeable future. The deal flow is utterly nontraditional, and have felt at times I am far below where I would be (from either a DD or deal experience point of view) than if I were at a MM PE or BB. It helps a lot that we partner with institutions and some megafunds on deals where I can see what level I need to be at and improve. Exit Opps at our fund have been all over, from F500 FP&A/strategy/corp fin, megafunds, leading VC Funds, SWF etc. The reason for leaving is that most of these people wanted a traditional salary/bonus structure that the founder wasn't prepared to give at the time (we had no exits).
Comp: Completely up to the Founder, and he is almost always open to discussion. My bonuses have been on the low end of the scale since we've had few exits in the last year. However, we have one or two large exits coming up in the next two years where we individually have ownership in the portfolio company's equity. We're talking low seven figures per person. The structure, to summarize, is erratic, but on average I'd say at market or slightly above.
The biggest factor about my job is that it's just interesting. I'm 27 and get facetime with a lot of executives, see all sorts of deals (solar energy in SEA, medicinal mairjuana in the US, F&B in China) and types of deals, our entire investment team have random backgrounds and can tap their network for the expertise that we need.
Apologies for the long post.
Been in an Asian Single Family Office for the last 5 years. About US$20BB in AUM.
Make sure you get along with the founder (and his extensive family). In the end, it is a family affairs and expect your boss to be a tyrant. As a family office, the founder, most often the patriarchal father is the one who is running the show. But he also have to deal with his extensive family members as well as his own children.
Good thing is it is not performance driven. Usually it is based on whether you have the right support system within the family office. As they say in the Jewish banks, whether you have your rabbi to make your case. 75% of working time is revolving of which fraction within the family is taking power and you want to make sure you are supporting the projects that the winning side of the family wants.
Typical day: we follow the flavor of the year. Last few years we are into real estate development and made a few investments into mix-used development, commercial buildings and high end hotel chains. This year, we are looking more into consumer goods and financial services. Work ranges from coming up with a business plan, securing JV partner, setting up a new business, working on daily operations, hiring management team, and optimizing operations and cross-selling within the group.
Exit Options: Some ends up becoming CEO of the portfolio companies that they started while they were at the group level. Some moves into regional PE funds covering the same companies on both deal origination and portfolio operations. Some of the GM/ CEO of the portfolio companies move to competitor's companies. But direct investment role transfers between family offices are very rare in my market.