Family offices have substantial capital to invest and have become a popular buzzword among company executives and investment bankers. I’ve found, however, that there are many misperceptions among these executives and bankers about family office investing. Here’re my observations.
1. This is not “dumb money”. Any dumb money was wiped out in the great recession.
2. Preservation of capital is key. Many times, social goals are important. Earning a financial return is in the top five goals.
3. Investment focus is often “nichey” or very narrowly focused and tied to special knowledge of the investment team or its advisers.
4. Because of #3, family offices prefer to keep a low profile to avoid being deluged with proposals outside the investment focus.
5. Because of the above points, raising capital from family offices is a challenging task.
These have been my observations. The article linked to this post efficiently highlights five key points about family office investing. I highly recommend that you read ” Five Reasons Why Family Offices Invest in Life Science Companies by Lucy Parkinson, Senior Research Manager of Life Science Nation. From my experience, Lucy is “spot on”.