Case Study 3 : Modern Single Family Office

Case Study 3 : Modern Single Family Office

by Angelo J. Robles, Founder & CEO and Joseph Reilly

INTRODUCTION

The Modern Single Family Office No. 3 is the third in a series of profiles of innovative family offices in the world today. We are attempting to capture the attitudes, behavior and characteristics of the newer types of entrepreneurial and active family offices that we see sprouting up, as well as the more established offices that have held the rudder steady for successive generations. The membership of Family Office Association seeks to learn from each other, and is often frustrated by the opacity of the family office world and the paucity of detailed data to be found in family office surveys. The very nature of family offices, the need for privacy and confidentiality, creates a veil over the sharing of best practices, processes and return profiles. We seek to ll this gap with critical insights into individual family offices, provided by our members and for our members, with as little editorial embellishment as possible.

Profile: This single family office (SFO) directs the wealth of a multi-generational European family. The primary family business was liquidated and the original patriarch mandated that the family office allocate a significant percentage of its assets to be exclusively invested by its directors in private and proprietary business structures providing a high degree of liquidity.

Under the current structure, the family office relies on a dedicated third-party management team to distribute earned income from various business entities to the respective family members. The professional management team is very active in supporting and directing the businesses that generate the consistent cash ow which sustains the income needs of the family members, as well as provide for infrastructure requirements, philanthropy, and incentives to management based on performance milestones.

 

Allocation Strategy and Office Mandate in a Modern Single Family Office

As opposed to other family offices that focus on wealth preservation by only using traditional allocation investment metrics, the profiled SFO seeks the income stream from cash-flowing assets while also building long-term enterprise value from its businesses. The office mandate does not permit allocations of capital to outside or third-party money managers. To date, this model has proven to be less volatile by comparison to beta instruments while generating substantial returns on capital invested.

Different than traditional private equity investment into cash-flowing businesses, one of the profiled SFO’s key allocation requirements is the ability to liquidate the portfolio without having to rely on the sale of a core business or asset. Additionally, the instruments are not public marketplace-determined, so market- to-market volatility is eliminated.

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