Family office fundraising: Face to face

Spyrios Poulis knew that the next day would be key. The co-founder and managing partner at multi-family office Seminal Capital Partners was scheduled to meet with a potential principal investor and his wife who were returning from a holiday in the Maldives. To convince them to sign up, he had prepared a lengthy, detailed business plan.

However, at a dinner that night, Poulios met a friend of the principal, whose advice caused him to revise the entire presentation. The friend told him that the principal's wife had been pushing him to work less and spend more time with the family.

"He said, ‘You're going to scare him, but more importantly you're going to scare his wife, about getting into something that's way over the scope that she's looking for,'" Poulios told the AVCJ Forum. "So instead we did this sort of Saudi-style, two-pager, big font, masthead. And the first line, about why he should have it, is: ‘To work less.'"

From a family office perspective, there are a lot of things that we worry about. And your fund is not one of them - Dan Farrell

Poulios' experience taught him a valuable lesson about dealing with families that many GPs have yet to learn. While it is always important to understand the concerns of one's audience, the unique dynamics of families put a spin on the process that can be difficult to appreciate. However, fundraisers who take the time to fit themselves into that dynamic will be rewarded for their efforts.

Willing investors?

Though family offices in Asia-Pacific represent a relatively small portion of the global family office market, they exercise more influence in the private equity scene than their global peers. According to the Global Family Office Report 2015, an annual survey published by Campden Wealth Research and UBS, more than 27% of the average Hong Kong family office portfolio was in private equity, as opposed to the global standard of 22%.

In addition, Asia-Pacific family offices had the second-best investment performance globally in 2014, which the report attributed to their comparatively larger involvement with private equity. Asian family offices saw a return of 6.3% in dollar terms, after Europe, at 6.4%.

These groups are an attractive target for GPs, but several family office heads in the region complain that the managers who pitch them are often so unaware of the needs of a family office that they just end up wasting everyone's time.

"GPs won't like this, but you have about 10 minutes to grab our attention. And after that, you either are winning, or you've lost your audience," says Kaj-Erik Relander, who runs a family office in Switzerland that focuses on global blue chip liquid investments and private equity. "During those 10 minutes you win the right to try to close the investment, if you did your homework well."

Most managers are aware of the importance of research to a successful presentation. However, their mistakes lie in the kind of research that they do. GPs often make their presentations too broad, as if for committees; but family offices are often much more reliant on the preferences of their founders.

Alexander Pestalozzi, who runs the Asia branch of the family office of German consumer goods magnate Theo Mueller, says that when GPs treat the family as just another investor it is natural to reciprocate that lack of interest. More importantly, such a pitch is likely to be dismissed because the intended recipient cannot understand what is being proposed.

"We've all been there, we have a PowerPoint presentation, we have to do 20 presentations in two weeks, and so we start at page one and we finish at page 30, and we read half of the words off the presentation," says Pestalozzi. "But he doesn't want that, that's not how he built his business. He wants you to put away your presentation and explain to him, in your own words, how the thing works."

In addition to the concerns of the founders, family offices are often the arenas for internal family conflicts to play out as well. This is another difficulty that GPs often underestimate, and which can lead to fatal misunderstandings.

For instance, a company founder with many children might appoint several of them to posts in the family office - which one earned the position through business competence, and which one was given the job as a sinecure? Getting this question wrong could mean, at best, a wasted meeting with someone who has no decision-making power; at worst, it could mean the complete failure of a pitch.

Show you care

Another issue is the necessity to maintain a connection with the family outside of their fundraising periods. Managers who only seek out the office when they need money are likely to be written off as having no understanding of the family's needs and no ability to help meet them.

"From a family office perspective, there are a lot of things that we worry about. And your fund is not one of them," says Dan Farrell, chairman and CEO of global multi-family office LP Privos Capital. "If we don't see you regularly, then we don't care about you, we don't have a relationship with you."

Despite these complicating factors, family offices, and those from Asia in particular can still be a useful source of capital for fund managers. Seminal's Poulios points out that he sees relatively little interest from GPs in Asian family offices, partly because they are a relatively recent phenomenon in the LP community. However, as the Global Family Office Report shows, the offices themselves do have considerable interest in private equity.

Mueller's Pestalozzi emphasizes that making things work with a family office investor means identifying the key players in the organization and building a positive relationship with them. That first step will set up all the future opportunities.

"If you can actually help the family office guy, that's key," says Pestalozzi. "If you guys are good, and you're going to perform, it's going to reflect positively back to me, so I want to make sure it goes through well. So you need to find the guy that likes you when you make the original pitch, and then he can help you as well."

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• Topics
• LPs
• Fundraising
• GPs
• Asia
• LPs
• GPs
• Fundraising
• Family office