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Struggling asset managers give family offices a huge hiring opportunity, but are they taking it?

Recruitment consultant Mark Somers, a Family Capital influencer, has urged family offices to grasp “the best opportunity since the credit crunch” to hire rare investment talent from private banks and asset management groups who are no longer willing to pay for their expertise.

According to Somers: “Employers seem determined to preserve their bottom line by putting cheaper, less experienced staff in charge of client business. But they are losing seasoned investors who know how to negotiate the best and most appropriate services, at the keenest price structure.”

Quite often, family offices only want a small investment team to make their business run better but they recognise the need for top advice to prepare for a severe market setback

He says: “A beacon hire can attract further talent.  Rainmakers are not afraid to recruit other rainmakers, while inferior managers condemn a family office to mediocrity and poor performance.”

The late Danny Truell was a classic ex-Goldman Sachs rainmaker who made billions for Wellcome, the UK endowment, by defying convention, and consensus, by firing its consultants, boosting a talented in-house team, selling vulnerable assets before the 2008 crisis, reinvesting at its bottom and selling sterling before Brexit.

According to successor Nick Moakes:  “Details he left for others to work out, but he maintained an impressive record of anticipating the markets and coming up with a flood of bold, often left-field ideas.”

It remains to be seen whether family offices will be brave, or flexible, enough to take on such determined investors. But opportunities to make strategic hires are increasing as asset management groups are forced to cut costs or merge with rivals in a desperate bid to remain profitable. 

According to S&P Dow Jones, 88% of US funds have lagged their indices over 15 years, held back by costs and underweight positions in the big tech stocks which are driving the index. 

Private and alternative investing is rising up the agenda as clients get nervous of elevated market levels. But managers cannot easily afford to pay armies of stock pickers to underperform for a unhappy band of clients demanding fee cuts. Some (though not all) hedge funds have been on the wrong side of market liquidity, which is making expensive stocks more expensive and cheap ones, cheaper. Some are shutting or closing to new business.  

Under the late Gilbert de Botton, GAM Holding extracted some of the fattest fees in the business from its squad of star managers. But its shares have collapsed 85% since 2018 due to poor performance, defections and client attrition. Few have performed so badly, but managers unable to replace a growing loss of business with client gains are on a slippery slope.  

Jupiter, one of the UK’s top equity managers, failed to collect any performance fees in the six months to June, and suffered a halving in profits.

Franklin Resources, a $1.4 trillion manager recently bought Legg Mason to pivot away from its struggling value-based funds. Jenny Johnson is the fourth member of the Johnson family to run Franklin since 1947. She believes the era of star managers is drawing to a close, as data-driven teams gain influence.

In May, Nancy Curtin became head of investments at multi-family Alvarium Investments, backed by Qatari family office Dilmun Group in May after her previous employer, Close Brothers Asset Management dispensed with her CIO role.

Family offices are more rarefied than asset management groups. Nothing is more important than working with the principal to safeguard the family fortune for future generations. 

But rewards for success certainly exist, along with a chance to build a business, and a team of analysts from scratch. Quite often, family offices only want a small investment team to make their business run better but they recognise the need for top advice to prepare for a severe market setback.

Denmark’s YardHouse, a relatively new family office, has chosen to take a hybrid approach, using increasing access to third party managers while building an in-house team. At the other end of the scale, the Bertarelli family has bought a string of top-rated firms to create an $82 billion asset management business called Northill Capital.

Often, investment professionals are hired with a view to developing multi-family businesses. Multi-family offices can be keen to show their credentials with a banner hire. Capital Generation recently hired Quintin Price, once a big hitter with BlackRock as head of asset allocation. Kemet Capital Partners of Singapore has just hired senior talent from Mizuho and Rockpool Capital.

Jane Bierwirth, co-head of asset management at advisory RSR Partners, says both sides need to discuss their expectations with care: “The offices should define the roles and responsibilities of each executive. Who within the family or among outside advisers has control of which assets and who has the authority to change existing arrangements?”

Mark Somers is the first to agree that 80% of family offices will fail to seize the investment opportunity, leaving the chase to a proactive minority. Charlotte Beyer, founder of the Institute of Private Investors, points out family offices often want candidates who can fit with their family values: “I think that’s a very tough assignment because you have to define what those values are.”   

Some family offices are reluctant to offer generous compensation, feeling that managers should be honoured to work with them. Kathryn McCarthy, director of the Rockefeller Trust Company says: “Some families want to get the best talent for the least amount of money and it doesn’t work that way.” 

A UK headhunter confirmed more investment talent was on the market, but he added family offices remained conservative in their hiring stance. 

James Alpha Advisors showed the risk-averse nature of US family offices, by putting together a fund in June 2017 which used the average asset allocations of twenty family offices in the Family Office Exchange. Since inception to March, the fund’s main share category only returned a negative -3.16% against a positive 1.9% from the Dow Jones moderate portfolio index. 

That said, a clutch of high-profile investment appointments over the last 18 months suggests some of the largest family offices are raising their game.

For example, top institutional investor Bjaerne Graven Larsen, founder of QBlue Balanced, who is now chairman of family office Kirk Kapital. Bjorn Thelander, a former executive with the Rausing family became investment chief at Sir James Dyson’s Weybourne. 

Boaz Sidikaro, former Och-Ziff partner, now at Perot Investments. Cyrus Jilla, former Fidelity International president now at the Bertarelli family’s Northill Capital; Bruce Zimmerman, formerly at University of Texas Management is CIO at the family office of Ray Dalio, founder of asset manager Bridgewater. Philip Bickerton recently left JP Morgan to become chief investment officer at Denlow Private Trust.

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