By Raphael Heynold and Stan Miranda
4 May 2023
The Partners Capital Best Practices in Institutional Family Office Investment Management whitepaper was written for both individuals looking to set-up a family office as well as existing family offices who are interested in benchmarking their existing set-up with that of others. This topic is inherently complex given the many different iterations of family offices, their purpose, objectives and the structure of the families whose wealth they manage. This paper is, hence, not aiming to provide off-the-shelf solutions, but to share our insights having worked with highly sophisticated family offices for over two decades.
The paper focuses on the key ingredients which we believe to be necessary for managing a successful family office for the long term, namely:
- Long-term family office success emanates from a clear purpose, vision and mission.
- The overall strategy for the family office is a direct logical extension of the vision for the family office and reflects corporation-like five-year plans with key initiatives, deliverables, deadlines and resources.
- Leadership and governance should follow best practices of any organization including an agreed Operating Agreement guiding who makes what decisions and calibrates optimal delegation to avoid stifling family office management.
- Investment strategy starts with the definition of distinct pools of capital by owner and their individual goals. These translate directly into specific investment strategies for each pool of capital to include target returns, risk budget, illiquidity budget and asset allocation.
- The team resource plan which falls out of the overall family strategy in #2 above.
We elaborate on each of these points providing an overview of what we have seen work well for some of the more successful family offices, be it those still managing an operating business, those purely acting as financial investors, those focused on philanthropy only or those dealing with a combination of these. We also provide a few examples of different investment strategies family offices we work with employ.