Family Offices: Direct Investments and Outperformance

2018-02-23T14:15:48+00:00February 23rd, 2018|

The search for Alpha, an asset’s return on investment compared to the expected risk adjusted return, has never been more relevant and poignant to Single and Multiple Family Offices.

Family Offices recognize that public markets, where asset prices tend to incorporate and reflect full information, have limited opportunities to generate alpha across their portfolios. Hence and in particular since 2008, Family Offices have progressively increased capital allocations to direct investments in private markets such as real estate and private equity where alpha-generating opportunities exist in greater supply.

However, Family offices encounter several problems in this pursuit:

  • sourcing high quality private market deals can be a highly cumbersome, fragmented and inefficient process; in a resource-constrained environment, Family Offices could potentially miss opportunities or dedicate considerable time in assessing and screening irrelevant deal flow.
  • conducting due diligence on the underlying company or investment can be hugely time consuming.
  • developing a direct investment strategy comes with a price; the cost of building an investment team to comfortably preside over an annual allocation and manage post investment risk requires a considerable amount of capital to deploy. This could result in competition with traditional larger growth and buy out firms and hence a focus on the <£50m market could mitigate over paying and diminishing returns.

Despite these common problems for Family Offices, recent developments in technology, new approaches to connectivity and investment community engagement through platforms such as Capitama can help Family Offices by:

  • creating a dedicated market network for connecting sophisticated investors and professional sponsors (i.e. venture capital firms, private equity firms and direct lenders) seeking to raise funding
  • improve the efficiency and process of sourcing high quality deal flow through its private capital network
  • investors including Family Offices are able to set their investment preferences so that they receive investment opportunities that are of interest to them and relevant to their investment mandate
  • providing a mechanism for co-investment (a popular trend among Asia-Pacific Family Offices), by enabling the invitation to new investors into their own private syndications acting as Sponsors to deals whereby they have already undertaken due diligence and in some instances pre-seeded the deal with a financial commitment.

Fintech is revolutionizing the way investment deals are sourced, conducted and executed; Capitama has the potential to become the leading private capital platform in the world by developing a new and innovative approach to connecting and driving investor / sponsor engagement.

Sophisticated Investors are encouraged to register with the Capitama network ahead of prelaunch in Q1 2017

Register here