Outsourcing SFOs: A Growing Debate Outsource or Build Internally?

Outsourcing SFOs: A Growing Debate Outsource or Build Internally?

Is Outsourcing SFOs the right call? 

With the costs of operating a dedicated SFO on the rise, due in no small part to increased regulatory and compliance-related expenses associated with Dodd-Frank, families of wealth are reevaluating how much functionality they should maintain in-house vs. outsource, and what minimum asset base is necessary to justify a dedicated SFO in the first place. This decision must also be considered in the context of what is almost universally accepted by most investors to be a world of declining expected portfolio returns. To the extent that families do decide to operate their own SFO, the question further becomes: how much functionality and expertise to build in-house vs. outsource? This brief white paper will address this question only insofar as it relates to the investment related functions of an SFO.

Some SFOs are fundamentally opposed to outsourcing or working with external investment advisers for a variety of reasons. Whatever the reasons may be, in an increasingly complex and global investment environment, the ability to expertly cover all asset classes globally in a cost-effective manner has become virtually impossible. Only very large SFOs, defined herein as those with more than $2 billion of AUM, can afford to maintain a large enough staff to attempt to do so internally. Those that attempt to do it with an insufficient staff run the risk of being stretched too thin and experiencing sub-par results in all areas

Outsourcing SFOs Topics

  • Defining Areas of Focus
  • Hiring and Retaining Talent within a Family Office
  • Trending…the Modern SFO as Wealth Management Business
  • Growing Pressures on Smaller SFOs and the Case for “Specialist Expert” Advisers
  • Plug-and-Play Options
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