Magazine Issues » November 2019

Sponsored feature: At the intersection of family offices and private funds

Serge_KrancenblumSerge Krancenblum, group executive chairman of investor services firm IQ-EQ, sheds light on the convergence of family offices, private markets and asset management.

IQ-EQ is set to hold its second IQ-EQ Crossroads event on November 27. The title ‘Private Equity/Real Estate Funds and Family Offices: A marriage made in heaven?’ reflects the growing connection between family offices and the private funds industry, two key sectors of the IQ-EQ business.

Serge Krancenblum says: “IQ-EQ has a strategic focus on private clients and on alternative asset managers, meaning mostly managers investing in private equity, real estate, debt and infrastructure. I have seen a real convergence between these two segments over the past years and this has inspired me to organise a conference around this theme.”

Krancenblum expects a healthy discussion around perspectives on how single family offices and alternative asset managers collaborate – and how they manage competitive pressures.

There is no particular definition of a family office, the Group Executive Chairman says.

“I can tell you that most of our private clients have more than €50 million in investable assets in their family office. We work with family offices that are located in a number of jurisdictions including the UK, the Middle East, Singapore, Hong Kong and South Africa, among others.”

He notes that very large family offices invest not only in funds, but also in direct private equity and direct real estate.

Shining a light on private insights
The event in London will bring together some key speakers in a business area which is often hidden from general view. It is a well-known fact that family offices prefer to talk among themselves – so IQ-EQ Crossroads represents a good opportunity to hear them sharing their valuable insights with the investor community.

Speakers at the event include Sir Mark Fehrs Haukohl, Chairman of the Vero Group; Dr Rebecca Gooch, Director of Research of Campden Wealth; Mark Florman, CEO of Time Partners; Elie Chamat, Founder and CEO of Decisive; Robert Evans, Senior Vice President Investment Solutions of Partners Group; Thierry Bosly, Partner at White and Case; Alain Roussel, Head of Private Institutional Clients EMEA and Chair of the Family Office Forum at Nomura; John Forbes, Founder of John Forbes Consulting; Tony Poulson, Director of Operations of Allvue; and Neil MacDougall, Chairman of Silverfleet Capital.

Where are these investments taking place and in which asset classes?
Talking about the current state of the market for these players, Krancenblum says: “The PERE markets are very active from an asset management perspective. Europe is doing quite well – it’s getting on with business. However, I would say that the UK is very subdued at present, stuck as it is in the Brexit loop.”

He adds that many family offices see private markets as a key investment area. “Family offices have always been important investors in private equity funds, but they are now gaining ground in the direct investment landscape as well. Also, they generally invest in real estate directly. This means that they are increasingly serving as both partners and competitors to many of the fund managers.”

In 2018, family offices invested 14% of their assets in direct private equity investments and nearly 8% in private equity funds, plus 14% in direct real estate. Only 1% was invested in real estate investment trusts (REITs), according to Krancenblum.
Including other alternative assets, their allocation is usually more than 40%.

So why is there such an emphasis on private markets by family offices?
“A low return environment for equities has clearly fuelled appetite for alternative investments and the recent Global Family Office Report 2019 released by Campden Wealth shows that private equity fared the best of all asset classes for family offices, achieving an average return of 16% for direct investments and 11% for funds-based investing. The performance of real estate also held up well, with an average return of 9.4%.”

What about real estate?
“Real estate investments continue, but are being seen less and less in the UK. It’s not only Brexit, but also the spectre of a Labour government coming into power with a general election planned in December. While I wouldn’t say that it’s the end of the road for the UK, there are fewer property and private equity deals in the UK for the time being.

“At the same time, the opportunity exists and hence the money goes elsewhere, like Europe or Asia.”

How are investors hedging concentration risk?
Asked how he sees appetite among Asian investors for investing in Europe – and European family offices investing in Asia – Krancenblum says: “I would not say that there is a huge trend of foreign direct investment going from Europe to Asia, but I do see a number of European families deciding they need to have, from a diversification point of view, investments in Asia.”

He adds: “Some of them already have a few members of the family settled in Singapore, for example, to open a branch of their family office. I work with a few such families. The thought process behind such relocation is that they should be where the growth is, and because it is disconnected from Europe in a certain way that hedges risk.”

When asked what trends he foresees for the family offices for the coming years, Krancenblum says: “Family offices take a much longer-term view when they make an investment. They don’t need to sell at one stage in order to distribute the proceeds to the investors and carried to the fund managers. They can invest for 20 years if they think it’s the right investment in a company or in a piece of real estate, so it’s an altogether different model that we see in this space.

“Their approach to investment is different to private equity but in an environment where good deals are scarce and dry powder has reached a record high, competition between private equity/real estate firms and family offices is set to intensify.”

These and more topics to do with family office investing will be discussed at the November 27 event. Learn more at www.iqeqcrossroads.com.

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