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Family Office Investments - The Future Fund

Speaking to a wealth manager that specialises in family offices, one aspect of their offering is to manage the endowment, PAF or "Future Fund" as a single OCIO-like function.

It got me thinking about the future funds that I have seen within the family office space and how the portfolio constituents and performance metrics are different from the other entities within the aggregate office.

First is the risk metrics - often we see a larger proportion of alternative assets that can take advantage of the "patient capital" nature of this portfolios. Downside risk is another major difference as often there is less tolerance for down market capture prevalent in the more capital growth seeking portfolios. The risk of losing money is more front of mind than the risk of lower returns.

Performance metrics are often different too - families are looking for steady, long term returns and therefore tend to look to university endowments and sovereign wealth funds for their investment strategies and measures.

Staff or counterparties to this portfolio is also looked at differently. I have seen a lot of family offices engage a single counterparty for this portfolio. Having just one wealth manager or private bank to manage the portfolio within a single custody arrangement (better for reporting) and if the assets are high enough, the full force of their offering can be engaged. This can include deep analytics on the portfolio across; factors, ESG and impact, risk, research, trading, custody, access to expertise and other family offices etc etc etc

The other method is to engage a consultant that specialise in this area that can bring their own unique skill sets and history. I see ex institutional portfolio managers and consultants as well as boutique firms that have global family office experience and tend to look at managing these portfolios in a specific way.

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