SFOs and Alpha: Searching for Alpha in the Private Market
SFOs and Alpha: Why Many SFOs Shouldn’t Bother
After years of high fees, unreliable distributions, and poor returns, many SFOs have abandoned their past participation in private equity funds. But rather than turn their back on the entire asset class, they have modified how they access private equity. They instead have charged into doing deals on a direct basis. The advantages of such a direct approach from both an intellectual and financial perspective are significant and appeal to many first and second generation SFOs. But this pursuit of doing private equity deals on a direct basis is best undertaken by only those family offices that possess the critical ingredients or are willing to acquire them. Such “must haves” will make a direct approach to private equity investing rewarding. The absence of them will doom the effort and waste valuable time and money.
How, therefore, can a SFO decide if “it has what it takes?” If it doesn’t, it shouldn’t bother to try to do deals on a direct basis.
- Structuring and Closing
- Setting the Right Goals