Meagher says that when pitching his company as a partner to other investors, he emphasizes that it can make decisions on deals quickly because it’s an 18-person operation. It’s also not constrained in the types of opportunities it can invest in, unlike some hedge funds that must stick to a mandate such as event-driven plays or macrostrategies.
That’s not to say family offices are without pressure. After all, business is far more, well, personal. The family doesn’t want to lose its hard-earned capital, and when mistakes are made, relatives can be just a few feet away. Another downside is the whim of owners, says Castine of Ridgeway Partners. “The person who controls the money,” he says, “could walk into the office one day and say, ‘I don’t like the way the markets look, and we’re going all to cash.’ And no matter how hard you work, your name isn’t going to change to become the same as the family’s. You’re always going to be a staff person.”
To that end, most family offices typically don’t offer executives carried interest, although more than half let them co-invest in deals, according to a September report by UBS and Campden Wealth. A few may even offer an ownership stake in the family business or office.
Meagher says the hedge fund industry remains one of the best career launch pads, because you get to work with some of the smartest investors in the world. Although the Huizenga family office still puts its money in hedge funds, Meagher is happy to be the allocator of one clan’s capital rather than fundraising in his old role at UBS O’Connor. “They are truly long-term investors seeking the best investments,” he says.
Which is why he opted to play small ball in the first place.
This article was provided by Bloomberg News.