Step inside Table Management, an obscure investment firm in New York, and something strange happens: You’re transported to the rarefied realm of Bill Ackman, the billionaire hedge fund manager.
Table, it turns out, is sort of a secret wrapped in mystery. From the same Manhattan skyscraper as Ackman’s Pershing Square Capital Management, Table handles the personal finances of one client: the boss.
Ackman’s setup might seem unusual in the hedge fund business, where managers stake their fortunes on the funds they oversee for clients.
But a growing number of prominent hedge funders are also quietly cordoning off private enclaves for themselves, often within their big-name firms. Eric Mindich, Dan Och and others have created what are known as single family offices-- and not everyone is happy about it. Critics say managers should focus on their hedge funds and, in effect, eat their own cooking.
“I expect hedge fund managers to be 100 percent invested in their hedge funds,” said Karl Scheer, chief investment officer of the $1.2 billion endowment at the University of Cincinnati. “I prefer that they’re singularly focused in order to achieve the best results.”
Blurry Lines
In some ways the managers are just following a basic rule of investing: diversify. But clients and regulators worry these one-member clubs could raise potential conflicts, ranging from who covers costs for what, to how investments might overlap or collide.
At the very least, the lines can get blurry. Table, for instance, invested in Sprout Pharmaceuticals, maker of the first pill to aid women’s sex drive. No sooner was the drug approved in August than Sprout was acquired by Valeant Pharmaceuticals International Inc., a firm that Ackman, from his perch at Pershing, had championed during a hostile-takeover showdown.
Family offices have been around since the days of John D. Rockefeller. But the business has exploded in an era of hyper- wealth on Wall Street, in Silicon Valley and beyond. Private equity titans such as Leon Black and David Bonderman have set them up, too. The firms handle all sorts of affairs, from taxes to philanthropy to maintaining homes.
“This is possibly a new era of family offices,” said Jamie McLaughlin, a Darien, Connecticut-based adviser to wealth management firms.