ACG New York’s recent Family Office-focused event brought together a variety of experiences to share insights on today’s family office
By Zoë Bodzas
(New York) ACG New York recently hosted an afternoon of networking and panel discussion focused on effective practices for family offices, “Getting to a Successful Exit: Starting Well to End Well for Family Office investing in PE.” Following a networking luncheon at the Harmonie Club, Samira Salman of Salman Solutions moderated a panel featuring Scott Budoff of CommonView Capital and Saw Mill Capital, Jolyne Caruso-FitzGerald of The Alberleen Group, Daniel Lubin of Radius Ventures LLC, and Olivier Trouveroy of MTN Capital Partners. This event, sponsored by Merrill Corporation and Duane Morris, offered an array of takeaways for attendees– capital providers in the family office sector.
Ms. Salman opened the panel by prompting the speakers to comment on the re-allocation of family office assets in today’s industry, especially the growth of private equity allocations. In today’s complex market, Ms. Caruso-FitzGerald recognized that “We have to increase our allocation to alternatives. Historically, that’s meant hedge funds. However, over the last couple of years, hedge funds have proven to be a challenging asset class in terms of returns. Investors will increasingly look to private equity to generate alpha in portfolios.” Mr. Lubin, who reiterated the shift from hedge fund to private equity, said, “I think families are migrating towards private equity: it’s hard because of the liquidity issue, and you have to get that down right… As long as you play that out well, I think [private equity] is probably the highest-quality, best-performing asset class in your portfolio.” Mr. Budoff affirmed these observations about private equity and the positive aspects of control investing in private companies, but also how important it is to select the right investment partners that have access to investment opportunities that leverage “true entrepreneurism by making investments in growing businesses that you can partner with to truly create value by focusing on the right thesis, the right team, and that are properly capitalized in the right markets, to create significant value.”
Ms. Salman then directed the panelists toward a conversation on the mechanics of these deals and best practices for sourcing. Mr. Lubin delineated a family office’s sourcing possibilities into three categories. First, an office should explore what they can source themselves. Then, there are opportunities through relationships with vetted, trusted groups, where “they’re doing the sourcing and the diligence and the monitoring for you, and also providing you with your quarterly or semi-annual reports.” Third, there is the emergence of co-investment funds. Mr. Trouveroy highlighted the importance of strong sourcing, “As an independent sponsor, of course, sourcing is crucial, because it this is our reason for being, in terms of being able to present attractive deals to our capital partners.” He added that a separation within the firm between originators and people who execute deals is productive, as is the use of executives as advisors “to help vet deals” with particular expertise.
Switching gears, Ms. Salman introduced the importance of co-investing and building collaborative partnerships, noting “the real value of doing deals alongside really seasoned investors.” On this point, Ms. Caruso-FitzGerald emphasized that, for minority investors, structuring is essential and that the possession of board seats, seniority in capital structure, information and redemption rights comprise “all the things you can mandate through structuring [so that] you can get successful returns as a minority investor.” Ms. Salman added that “Structuring allows you visibility, control, and data.” Mr. Trouveroy also contributed to the discussion on co-investing, underlining the value of expertise, similar investment philosophies, and integrity in a potential partnership. Lastly, Mr. Budoff emphasized that the real work starts at closing and that “more than 50% of the value of these investments is created after closing the deal, as these investments can require 5-10 year hold times to allow investors to reap the benefits of investing in growth and strategic market development.”