Mountains in Clouds


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Hall Road Investments #65 (Family Office Sherpa, Index & ESG)

See below for the latest newsletter. As always, if you want daily updates on what I’m looking at, start following the Hall Road LinkedIn page here.

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Happy reading.

The Sherpa Update

Family Office Survey – KPMG and The Table Club have released their 2021 Family Office survey. We had a lot of clients and contacts participate so I’ve been waiting for this one.

Some of the points to note for me; the need for an investment policy that reflects the objectives of the family but also the risk appetite (often I see these not matching), insourcing vs outsourcing (investments, staffing, technology), the rise in private markets allocations and the use of Multi Family Office structures.

There is also significant time given to intergenerational transfer which in my mind crosses over all aspects of the private office. One area where we see families start this journey is the improvement in reporting – nothing disengages quicker than multiple spreadsheets and a hard-to-understand exposure map. Even basic upgrades to the reporting structure will do wonders for bringing in the next gen whilst reducing key person risk.

They use the Future Fund as a family office case study. In my experience, the FF investment policy is a good start for families looking to structure something that is long term growth with an eye to both downside protection and opportunistic investments.

Family Office VC – A very timely report from Silicon Valley Bank (SVB) and Campden Wealth on how Family Offices are investing in Venture Capital. Again, we had clients participate so it has some local resonance.

As we saw with Lipman & Burgon hiring an alts specialist CIO and KKR/Blackstone pushing into wealth management, the need for skill sets in areas where families are allocating capital is becoming essential for advisers and private offices.

Some clients are moving into VC haphazardly and this report should provide a nice roadmap for any family looking to improve their due diligence framework. For wealth managers looking at the next generation of clients, the numbers don’t lie – “Last year, the second most common area in which Next Gens were involved in their family offices was venture capital investment (33% of participants). This year, VC is the top ranked area for Next Gens to be involved (39%).”

Sequoia – has decided that the 10 year fund cycle for VC is obsolete and have decided to launch a single, permanent fund. The way they describe it (a crucible moment, no less) seems that they’re the first to think of it but to me it sounds like a classic fund structure that increases liquidity for those looking to invest in VC. From the comments on LinkedIn and subsequent articles I may be missing something though.

As with firms like Antler, the launching of a longer-term fund makes a lot of sense for a firm such as Sequoia that would be first call and nothing says fundamental like assisting with actually building a company. On the face of it, I do wonder if there is a difference in VC exit mentality and that of a long-term portfolio management company. As I’m sure we will see more of these strategies launched, it will be interesting to see who they have running the new portfolios.

Club Membership – there seem to be more and more networks catering to family offices. The latest is R360, from ex Tiger 21 and Cresset Asset Management executives and targets those with US$100M or more. As apposed to Tiger 21 which charges around US$30K per annum for membership and has approximately 1000 members, R360 memberships are for three years and US$180K.

I’m a little unsure as to the ultimate business model of this new one, despite claims to the contrary it seems more aligned to the investor network model rather than the more member based, holistic support network that we see in others. Anyway, I’m sure it will gain traction within certain areas and the trips to Branson’s Necker Island look fun.

Addepar – continues to spend up, this time acquiring auto rebalancing firm, AdvisorPeak. As we have noted previously, rebalancing the portfolio is one of the hardest things to get right and one of the most important drivers of long term returns.

Addepar seems to be acquiring quite a few of its preferred partners. It makes sense, partner with a firm and see if it gains traction with your clients then bring the successful/high demand ones in-house. Helps to have a recent $150M raising too.

Wealth Management – UBS has come out with a bumper profit for its US wealth business as adviser productivity increased and demand for its lending and SMA products rose. One aspect that should interest wealth managers reading this newsletter, they have decided to take on what BCG calls the “simple needs” cohort of clients. This was detailed in their 2021 Wealth Manager whitepaper in which they note this as being the great untapped client base.

UBS are doing this by launching a Digital Advice offering which I’m sure will include its big revenue earners plus direct indexing, all nicely packaged up in a model that works at scale. Build or buy? My bet is on them acquiring something.

Regal Funds – as a fund manager, it must be nice to be approached by a group of family offices with an idea.

Ellerston- Has decided to close the Morphic fund due to low FUM, but not bad performance. Shows that marketing is half the battle and with staff losses comes redemptions.

Oppenheimer – The family office move to Singapore continues unabated as Nicky and Jonathan Oppenheimer open up an Oppenheimer Generations office to partner with local families. It’s seen as a connecting office between Asia and Africa and joins Sergey Brin, Dyson in setting up investment offices in the area.

Metaverse – follow on from the Lumen Capital piece I linked in the last newsletter, I met with Dyno Zhang from Macro Capital for an educational coffee from someone deep in the weeds and what it means for big technology players. There was an introduction to the term DAO and wouldn’t you know the AFR had a nice coverage on it this week, which includes the fact that Australia could be the first country to formally recognise the DAO as a legal structure. As with all things in this area, the education continues.

Real Estate – Zillow’s investment platform for flipping houses (called iBuying) is a strategy we haven’t seen here. Maybe this is why.

Pinnacle has tipped in $3M for Aussie fund manager marketplace OpenInvest. It makes sense that a multi manager firm is investing in a platform that allows for a one stop shop for transactions into a curated list of unlisted fund managers. We have seen this tried in the US and success or failure seems to rest on your ability to attract a wide range and number of funds on the platform.

OCIO Benchmarking – if you can ignore some of the hyperbole in the opening of this blog post, some of the points he makes about keeping your outsourced investment manager honest are very helpful. Attempting to hide underperformance with changes in benchmarks and other mechanisms is something we try to alleviate for clients by moving them to infrastructure that can actually provide accurate and timely internal benchmarking across a range of performance metrics.

Hub24 – The platform space in Australia continues to get smaller as a few get bigger.

University Endowment returns – as with family offices, the move to VC and other private market holdings has provided some high, uncorrelated returns. However, as Pitchbook points out in the article, these private valuations may not hold up to public market scrutiny.

Benchmarking – It was always hard to determine the proper benchmark for a basic SAA portfolio, this article from Morningstar illustrates how to approach this challenge for investors. Admittedly they are selling product, but you can build your own and manage it through a good platform.

We are seeing clients invest in multi asset portfolios and often the managers benchmark is not true to label. Know your product.

Family Office Staffing – Forbes has an article on the dos and don’t of recruiting for Family Offices.

Meetings: Masttro, ONDA Group, Canopy, Mirador/Addepar, Pzena (Value Manager), Private Wealth Network (FO Technology), Integrated Portfolio Solutions, DSC (Family Office IT), Private Reporting (FO reporting), Macro Capital (Metaverse), Wayfinder Capital (Searcher Funds), MFO (Sydney), SFO (Perth, HK, Brisbane, Melbourne), Wealth Managers (Sydney, Melbourne).

ETFs & Indexing

Bitcoin ETF – has been successfully launched in the US amid great fanfare (and flow). Important to note, this is using BTC Futures, not the actual crypto currency. For those looking at this allocation, read this article on why this is important to differentiate.

Leveraged ETFs – and whenever someone launches a new asset class fund, someone finds a way to leverage it. What could go wrong with that.

ESG & Philanthropy

Stranded Assets – I interviewed around 20 single/multi-family offices in Australia and NZ for a recent research project and one of the topics was on SRI/ESG. When I mentioned stranded assets risk – that the company or fund that you invest in will be left with an asset that can no longer be sold – most feedback was that this presented more of an opportunity than risk. A thought nicely illustrated by this Bloomberg article on how hedge funds are buying assets from owners that are forces to sell.



“Hall Road Investments Pty Ltd is a Corporate Authorised Representative (CAR No. 001279456) of Non Correlated Capital Pty Ltd (AFSL No. 499882). Shaun Parkin is an Authorised Representative (AR No 001279458) of Hall Road Investments Pty Ltd (CAR No. 001279456) and is authorised to provide general advice to wholesale investors”

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