Not so long ago, T.F. Meagher worked at a hedge fund. It was a successful hedge fund, too—the $6 billion UBS O’Connor, which was actually gaining assets instead of losing them, unlike so many other hedge funds of late.

The big leagues always had a certain appeal for the former University of Illinois shortstop. Yet after six years of working his way up to executive director, Meagher, 36, found himself mulling a new job in the spring at a boutique investment firm a fraction of UBS O’Connor’s size: the family office of Peter Huizenga, who helped build the Waste Management trash-collection empire. When Huizenga Capital Manage­ment offered him a job as an executive director, Meagher opted to play small ball for a change.

No longer does he spend his time persuading investors to put money in hedge funds as people are pulling out of them. Instead, he’s helping deploy the firm’s assets—$601 million, according to a filing—in a role the 18-person operation created specifically for him. “That’s one of the nice things about family offices,” says Meagher, who sold himself as someone who could expand the Huizenga network and develop more partnerships for the company. “They can be really selective.”

A decade or two ago, working at a hedge fund was the hottest career in finance. People flocked to the companies in New York, London, and Hong Kong. Their leaders made billions. Employees made millions. Then came the financial crisis, low-interest rates, passive investing, smart-beta ETFs, and computer-generated portfolios. Everything got a lot harder.

Hedge funds, especially, are reeling. Globally, investors pulled an estimated $25.2 billion from the industry in July, the highest monthly redemption since February 2009, according to an EVestment report. Pension plans and other large investors have redeemed from some of the industry’s best-known names, including Tudor Investment and Paulson & Co., after years of lackluster returns and high fees.

This means people in Meagher’s former role at hedge funds are often devoting much of their efforts toward retaining assets in funds that are under performance pressure rather than spending time raising additional capital, he says. And the retrenchment is fueling layoffs and closures. “There’s overcapacity in the hedge fund space,” says Brendan MacMillan, New York-based chief investment officer of Akkad Capital Partners, a family office. “The problem is that a lot of the launches have gone nowhere, and you’re left with a group of talented people without a home.”

“The magnitude of wealth that these family offices control ... has helped establish an industry that’s really coming into its own.”

For financial professionals navigating these turbulent employment seas, a family office looks a lot like a white-sand island with a patch of coconut-laden palm trees. For more than a century they’ve existed to manage the financial and/or personal affairs of the wealthy, from John D. Rockefeller to Bill Gates. The financial figures are vague on how much they hold (most families tightly guard the extent of their wealth), but estimates have put the figure at $3 trillion to $4 trillion globally. By comparison, the hedge fund industry manages about $2.9 trillion, some of which it happens to invest for family offices. “The magnitude of wealth that these family offices control, and the number that have been created recently, has helped establish an industry that’s really coming into its own,” says Bill Woodson, who runs the group at Citi Private Bank that advises family offices in North America.

Traditionally, family offices handled duties such as accounting and tax planning, as well as arranging travel and paying chefs, nannies, and yachting crews. Such operations typically wouldn’t have more than a handful of employees, let alone a team dedicated to investing. But industry consultants say that’s quickly changing. More family offices have multiperson staffs to pick securities and strike deals in-house, in a shift that makes them more like professional investment firms. Top B-schools in the U.S., including the University of Pennsylvania, Northwestern University, and the University of Chicago, have recently introduced courses tailored specifically for working at family offices. “The caliber of the executives who are interested in working at family offices is really increasing relative to 10 or 20 years ago,” Woodson says. “It’s becoming a more sought-after career path for senior executives. That raises the bar for everyone at the family office and helps to professionalize them.”

And with the number of megamillionaires and billionaires skyrocketing around the world, the trend toward family offices appears to be accelerating, says recruiter Jeanne Branthover, a partner at DHR International in New York. That’s in part because, once you’ve accumulated that much wealth, it can be cheaper to manage the money yourself.

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