During the financial crisis hedge funds didn’t exactly endear themselves to many family offices, with their opaque redemption structures and underperformance during much of the crisis. But, with some trepidation, family offices have since ventured back into them.
Vidak Radonjic, CEO of the New York-based Beryl Consulting Group, which advises family offices on hedge funds, reckons family offices are back to pre-crisis levels when it comes to investing in hedge funds. “I would say at least 25% (of a portfolio) is being allocated to hedge funds today, especially as all assets classes have gotten in bubbly territory in recent months.”
Hedge funds themselves have made an effort to win back investors by softening redemption penalties and reducing fees.
Nevertheless, others reckon family offices and the ultra-high net worth are still very cautious. The UHNW investment membership group, Tiger 21, says hedge funds as a proportion of portfolios is a much lower 8% among its members. But allocations have increased by 1% in each of the last two quarters, says the New York-based group.
When it comes to specific hedge fund strategies, Radonjic says, macro and long-short strategies are most popular with family offices.
Here’s 10 hedge fund firms that family offices like:
Birch Group Capital
Launched in 2013, the New York-based hedge fund group has attracted considerable interest among family offices. Strong performance since its launch and a pretty good pedigree of its founder Jonathan Berger has sparked enthusiasm. Analysts say that family offices like smaller hedge fund firms because of their entrepreneurial approach, cheaper fee structures and, in many cases, better performance compared with the bigger funds.
Brummer & Partners
The Swedish-based hedge fund firm that was started 20 years ago saw out the financial crisis better than many of its counterparts in other parts of the world - that has made it popular with family offices. Brummer’s long-short global equity fund Zenit, which is also its oldest, is particularly liked.
Hutchin Hill Capital
Another relatively new name attracting the attention of family offices, Hutchin Hill was started in 2007 by mathematician Neil Chriss, with seed capital from Jim Simons’ family office. It now has more than $6 billion under management.
Och-Ziff Capital Management
One of the biggest hedge funds managers with $48 billion under management, Och-Ziff has long been popular with family offices during its 20-plus years of operating. Strong performance in recent years and the fact that it avoided the worst of the problems experienced by many hedge funds in 2008/2009 have endeared it to UHNW investors.
Odey Asset Management
The London-based hedge fund group, run by Crispin Odey, has been a perennial favourite of family offices. Odey AM has consistently performanced strongly since it was founded in 1991. It now has around £11 billion under management, with the very rich contributing a considerable amount of this.
Raveneur Investment Group
Another new hedge fund that is attracting the attention of family offices. The event-driven specialist was set up in 2014 by Mark Black, an alumni of Tricadia Capital Management, a New York-based multi-strategy firm, with a good reputation.
The famed James Simon run hedge fund group has attracted considerable money from family offices. Renaissance’s top performing Medallion fund has achieved extraordinary returns since it was launched in 1988 - but is now closed to outside investors.
Just launched at the beginning of 2015, Systematica came out of the UK-based hedge fund firm BlueCrest Capital Management and is already very much on the radar of family offices. Also, it’s one of the few hedge funds run by a woman, Leda Braga.
Tudor Investment Corporation
One of the most successful hedge funds, Tudor has been a long-term favourite of family offices. Now 35-years old, Tudor’s global macro funds are particularly popular among the UHNW.
Winton Capital Management
David Harding’s Winton Capital has been one of the best performing hedge funds for some time and now has around £30 billion under management. Winton’s strong and consistent performance has enamoured it to family offices since it was launched in 1997.