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Can anyone can build a “private office” – Part 1

How anyone can build a “private office” – Part 1

The question of how much you need to establish a family office is complex. There are many factors that affect the costs vs benefits of building this structure. But that’s not what I want to talk about in this article. I want to see if we can replicate the best bit of the family office structure at any size.

Best Bit 1 - The Investment Policy (IPS)

Anyone can have a policy and strategy for how they invest. Let’s take one aspect that all family offices should have – the IPS.

There are typical components of this document, none of which required $200M to establish:

1.   Purpose - This will reflect the ambitions of the policy.


Outline what this document aims to provide - a guide for the Investment Committee/Family/Advisers when making recommendations and decisions to buy, manage and sell investments.

The IPS should also outline the philosophy of the group/individual - what do you believe in and by what principles the money should be managed by.


2.   Risk Tolerance & Target Return


Sometimes called an "investment mandate".

Just like your discussions with a doctor, it pays to be honest. If you say you are risk averse and then place bets on speculative investments, you are just lying to yourself. Be honest enough to say it in this document how you really want to deploy this capital. The good thing is that there are low barriers of entry to almost every type of investment via ETFs. For better or worse.


It should also provide detail on expected return - both in aggregate (eg CPI+) and at the asset class level ( Index +) .


3.       Asset Allocation


A good way of establishing an institutional level asset allocation is to use global asset manager weightings. And how do you find those? Multi Asset ETFs must provide the detail, you can use them (Source, ASX)


4.       Insource vs outsource.


Do you want to manage these assets yourself via direct investments? Fine, but there is also the option of implementing via a wealth platform or multi asset funds.


 5.       Investment Beliefs


  • Do you believe asset allocation is the major determinant of investment performance and risk?

  • Is there benefit in high turnover and transaction style investing?

  • Will a long-term investment horizon (of 7 – 10 years) increases the probability of meeting the investment?

  • That benchmarks should be appropriate to the Family Office and are not driven by market consensus?

  • That an illiquidity premium exists and should be exploited?


6.       Performance Benchmarking


You don’t need billions to keep track of your own skill or to keep counterparties honest. Even the lowest cost platforms have an ability to provide investible benchmarks:


 7. Reporting


There are tens of billions of family office assets run off Sharesight. You won’t get the sophistication of the more expensive platforms, but it will provide most of what you need – stocks, ETFs, managed funds, manual assets (private markets, direct investments etc). It will also show you Asset Allocation and basic exposure reporting which is better than Excel!


 Source: Sharesight

 8. Roles & Responsibilities

Who’s managing this money and why. If the decisions are made by an individual or others within the family. Who has responsibility for administration, talking to the broker/banks etc. Spell it out.

And that’s a good start I think, this is just a superficial run through but you get the idea. Even if you have the money to start a full service family office you will need to establish the IPS.


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“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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