Family Offices

Any known family offices that are great? Feel like these are the secret place to be. Great WL balance (usually very little weekend work, can get busy weekdays or course) but also somewhat predictable. Mandates are also taken without much pressure from LP's and the money in the fund is stable usually. Pay is pretty good because you make up for smaller fees with greater AUM per head.

Sometimes get to do public investing, and investing across a ton of asset classes RE growth traditional buyout.

Which hire, how can I get into the processes, and what are some that have good reputations?
Do they like people from traditional backgrounds (e.g. will look for and compensate for people with IBPE backgrounds instead of being lax on those things and also pay less if that distinction makes sense).

Also any day in the life or more context, some description of how it's hairy, or generally how FO life has been for you or people you know?

Comments (11)

 
  • Intern in IB - Gen
Oct 13, 2020 - 4:51pm

Dell has 148 LinkedIn employees, so have to assume they hire occasionally.

 
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  • Associate 3 in PE - Growth
Oct 13, 2020 - 4:57pm

Institutionalized family offices with full investment teams include Cascade (Bill Gates, Seattle-based), Soros, Willoughby (Dan Och), Willett (Bloomberg), Vulcan (Paul Allen), Elysium (Leon Black), Declaration (David Rubenstein), Everblue (Eric Mindich), Omidyar, Premji Invest (Azim Premji), etc. Lots of large hedge funds have also converted to family offices, which I'm sure have maintained at least some of their investment teams (Appaloosa, Paulson, etc.). These firms are more culturally similar to large, institutional asset managers.

MSD Capital manages significant external capital (so it doesn't really feel like a family office anymore), and many of the family offices listed above (especially those run by former GP investors) raise SPVs with third-party capital to 1) provide leverage and pursue larger transactions, and 2) generate fee income. Declaration, for example, is fully institutionalized and chasing deals with third-party SPVs. Lots of family offices are now also jumping on the SPAC bandwagon.

Most family offices, no matter the size (aside from the institutionalized managers mentioned above), operate extremely lean teams with fewer than 10 investment professionals putting capital to work across public/private markets, industries, asset classes, etc. These firms are generally super low profile and often will not have a website or advertise their existence in any way. Outside of the direct investment function, family office teams also manage the principal's liquidity and general exposure (by industry, equity vs. credit vs. cash, etc.), as well as any activities pertaining to personal assets (selling a jet, buying a yacht, etc.) or charitable contributions (for example, coordinating with a broker to sell shares of AAPL to fund a donation to the family foundation).

Taxes tend to be a significant factor as well - family offices generally like real estate (tax-advantaged) and may seek to avoid credit (interest payments are taxed as ordinary income). Liquidity is also a unique concern (just because you have dry powder doesn't mean you're in a hurry to deploy capital - there are no concerns around deployment pace, fundraising, etc.) that could result in a more conservative investment posture vs. institutional investors (funds don't care if investor capital is locked up for 10 years. Family offices do care).

These firms use headhunters or their proprietary networks (everybody knows everybody in the family office world) to fill open positions, which are generally extremely rare. However, as family offices grow in size and number, this dynamic will likely change.

I work at a family office managing assets for a former GP of a large private equity firm. Work/life is great but volatile (very lean team means sprinting when it's busy, very relaxed when we're in capital preservation mode), compensation is good given the work/life balance but not exceptional by any means (in-line with middle-market PE for me), work spans all asset classes and industries, I have lots of autonomy and responsibility, and I get to work closely with / learn directly from the managing principal. However, the pace is vastly slower than an institutional manager (obviously), so it's not as great of a learning experience. I'd heavily encourage family offices for those who are more focused on earning great but not legendary compensation (probably caps out at $800k to $1mn cash comp per year for a firm managing up to $1bn, obviously increases with higher AUM) while enjoying often amazing work-life balance (with the right principal, you'll probably work ~50 to 60 hours/week at the junior levels, ~40 hours/week at the senior levels). For those who want to build generational wealth or start their own investment firms, an institutional manager will likely provide a better opportunity to establish a track record.

I want to caveat, however, that the nature of family offices (super small teams managed by one single person/family) means that culture, compensation, etc. will vary wildly from place to place. If you don't like your principal, you will not like your family office job.

 
Oct 16, 2020 - 12:33am

Great summary and 100% accurate in my experience - we work closely with a handful of family offices and this describes the work/life balance, dynamic and recruiting process we have seen on our end. 

One counter/context I would like to point out on above. Although generally I would agree that FOs are conservative relative to other institutional investors, the face most are being privately capitalized with long investment horizons they can also be far more aggressive during down periods so you can learn a lot if you are at a shop that's in expansion mode.

Another notable element worth pointing out is that the level of direct involvement of the family will create a lot of variability in your experience. At its best the family leadership will leverage previous direct experience where applicable and hire experts in areas they don't understand but there is the more unfortunate pattern of extremely successful people where "if all you have is a hammer, every problem looks like a nail" and jumping into areas/businesses they don't understand.

This also can lead to family members getting preferential treatment which is its own can of worms and leads unfortunately to the biggest downside of FOs in that your long term upside is often limited because no matter how capable you may be you don't have the right last name.

 
  • Managing Director in AM - Other
Oct 14, 2020 - 8:28am

Happy to provide some context. After starting my career in UHNW wealth management at a BB, I switched over to my first FO job and after ~2 years recently switched over to another FO which I am setting up from scratch. To touch on some of your points:

Work-Life-Balance: Highly depends. Generally, since you are buy side, outside of a deal your life is pretty good - think 9 am to 7 pm with frequent outside 60/90 minute lunches with interesting people who want to sell you something. During a deal (we were very VC focused), depending on the scope it would get later but the "late nights" of staying past midnight were not too frequent. My current job which is more focused on public markets is much more relaxed - think 8:30 am to 6/7 pm every day. I would expect that to only go up if we have transactions. Overall, I really can't complain.

Hiring: Very hard to apply for an FO job since they tend to be very small (max. 5 people for most ones I know, sometimes 10-15 if they are super sophisticated). You'll get offered a FO job if you are in the right place at the right time and someone puts your name forward or a recruiter reaches out. Try to be in a relevant field (PWM, asset management, PE, VC, RE) and stay in contact with people on the FO side so if they ever hear of an opening they can pass your resume along. What surprised me is how secretive FOs are if you are a bank as opposed to how open they are when you are also working for one - clients of ours would share nothing with us, but after reaching out to them once I was "on their side", they basically told me about their entire setup, banks, investments,... On the more senior level, headhunters get used frequently but they usually end up hiring from other FOs or seniors from PWM roles.

Pay: I got a small bump of my bank salary upon switching and that has steadily increased since I switched to the FO side. However, as far as I know most FOs are not fans of the "annual bonus" as you have it in a bank. Expect to get a small cash bonus (think 1-2 months salary) and maybe carry (either via the fund structure or through co-investments, i.e. on the VC side I got shares in projects we launched). I know of bankers that switched an FO, get their 500k salaries + 20% bonusses but have no further carry. I am personally a fan of the carry compensation because it shows aligned interests. If you come from IB/PE with big annual bonusses there is a good chance you'll earn less (but also work much less).

Work: That is what I love the most about it. My days are super versatile - between talking to potential founders/companies to invest in, to discussing our asset allocation with bankers, to setting up tax structures and reportings, you really get to see a lot of things. In 2 years of being in an FO, I've pretty much touched any asset class (public equities, fixed income, private debt, VC/PE/RE direct and through funds, crypto). You get access to super interesting people - CEOs, founders, VCs, top-tier PEs (Blackstone etc.). I personally love it - especially that I get the intersection of investing, tax and legal. However, I know that's not for everyone - if you just want to pick stocks all day or do pure VC investing, you might be better off somewhere else. In the end with small teams everyone needs to take care of everything. If necessary you're the one driving around picking up mail, going to meetings of the homeowners' association, buy gifts for someone your boss wants to buy a gift for... We interviewed a guy once at a top-tier PE firm who said he'd just want to do PE and nothing else - we turned him down because it just wouldn't be a good fit. Lastly, as with any job with a small team, don't expect training - you need to be a self-starter unafraid of tackling a project holistically (ranging from legal to tax to DD). 

Culture: As mentioned by the post before - culture varies wildly with the FO (and boss) you are working for. It can be great or it can be terrible. Deals you love get killed because your boss doesn't like it. Professional growth is dependent on what they want to make possible for you. If they prefer you in your current role, you might not get additional responsibilities.

Good chance that I am forgetting something, but I'll monitor - feel free to ask any questions you may have beyond that.

 
  • Summer Associate in IB - Ind
Oct 14, 2020 - 11:21am

What level were that bankers that moved over and got $500k salaries? What would you expect someone to make after an MBA and 1-2 years of IB?

 
  • Managing Director in AM - Other
Oct 14, 2020 - 12:52pm

I'm not in the US but Europe, so hard for me to assess. But I would expect fixed salary to be in line with whatever you might make in banking/IB (i.e. fairly competitive), but as mentioned bonus likely 10-30% rather than 50%+ what you might see in banking.

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