Key Strategic Benefits of Working with Family Offices and Private Equity Funds
By Amed Hazel
The family office space has been a space that is pretty secretive and elusive. We first have to ask ourselves, “What is a family office?” A family office is generally broken up into two different categories. One is a single family office. The other is a multifamily office. A single family office is a full wealth management system based around a single individual or single family. That may include tax preparation, tax advisement, wealth management, portfolio management, even down to possibly hiring a butler for the family. A multifamily office is a financial structure, wealth management structure centred around multiple individuals or multiple families.
Depending on the family or individual’s net worth dictates whether the family would need a single family office or a multifamily office. Single family offices are generally for individuals of $100 million and up of net worth. Multifamily offices are individuals with less net worth than that, and those individuals will partner up with a financial management company that includes other families and other individuals to lessen the financial strain on that individual or multiple individuals that have less than $100 million in net worth. The financial expense is spread across multiple families in this instance.
What is a private equity fund? A private equity fund is a collective investment system used for making investments in various equities, as well as to a lesser extent, debt securities and those are based around one of the investment strategies associated with it. In my case, we have a private equity fund that’s focused more toward purchasing nonperforming notes and distressed assets related to real estate. The key relationships for family offices and private equity funds is that the family office can be a source of capital for the private equity fund because we’re looking at ultra-affluent, high net worth investors that is looking for a way to turn, as well as increase, their profits for the sake of the family.
The private equity fund could also be a source of deals for the family office. The private equity fund could supply possible apartment building deals to the family to see if it’s a good fit for that family’s investment strategies.
Private equity funds could also liquidate deals and purchase deals from the family office. You may have a family that has a portfolio that they’re looking to liquidate, and that private equity fund could act as a vehicle or a pipeline of liquidating those assets and returning capital to the family office. The private equity fund also acts as a total platform for the family office to purchase distressed assets and get advisement on purchasing those assets where they can perform the due diligence and all of the legwork around a deal and supply the family office with a clean investment that they can fund and have in their portfolio.
Fund Manager for Nonperforming Mortgage Notes, Private Equity and SDIRA