Family offices cosy up to institutional investors

A growing relationship is developing between family offices and institutional investors as the two groups co-invest on a more regular basis in order to take advantage of each others’ expertise, contacts, and assets.

The growing relationship between the two is perhaps best illustrated with the joint venture between Claridge, the family office of Stephen Bronfman, and Caisse de dépôt et placement du Québec, one of Canada’s biggest institutional investors. The two investors formed Claridge Israel in 2015 to invest in high-growth economies, with Israel being the first on its list. The group recently announced a $36 million investment in an Israeli cybersecurity group called AlgoSec.

The Bronfman family, one of Canada’s wealthiest, has been active private equity investors in Israel for over five decades. But the joint venture with CDPQ is a departure from its previous strategy of doing those investments alone.

“CDPQ brings more money to the table, allowing Claridge to gain access to bigger deals, whereas for CDPQ they get a seasoned investment group that knows the market well and is also very well connected in that market,” says someone close to the two groups who wanted to remain anonymous. CDPQ has around $220 billion under management.

Those reasons are likely to be driving other family office and institutional investor to co-invest. Just last week, two other Canadian family offices, BRK Capital and Walter Financial, co-invested as limited partners with the Healthcare of Ontario Pension Plan in a fund set up by Sagard Holdings, a subsidiary of Power Corporation of Canada.

Also, this week saw the announcement that the Alaska Permanent Fund Corporation, a pension fund for the US state, is to team up with Al Maskari Holding, an Abu Dhabi-based family office, to set up a fund to invest in the Middle East, Africa, and South Asian companies.

Of course, limited partnership co-investing between different investment groups in the world of private equity has been happening for years, but the difference now is that the family offices and institutional investors are more likely to co-invest as general partners. The Claridge/CDPQ deal is an example of such a move.