Family offices want flexible solutions from PE - AVCJ Forum

“The blind pool model works for GPs with institutional relationships, but when you are a new investor raising capital what your investors want is flexibility,” Mark De Ambrosis, a managing director at Armitage Associates, told the AVCJ Australia & New Zealand Forum. “It’s not, ‘Here is a check and I will talk to you whenever you want capital.’ These investors want more engagement.”

Armitage is a growth investor established last year as a partnership with Trawalla Group, the family office of the Schwartz family. Trawalla represents committed capital, backing every transaction, and the plan is to have other investors, including family offices, participate on a deal-by-deal basis. However, De Ambrosis admitted that he is still working on a happy medium between blind pool and deal-by-deal.

Despite a general hesitancy among family offices to support blind pool funds, Simon Ford, CEO of Intrepid Investment Partners, argued that funds are still likely to play a prominent role. “Fifty percent of the population just wants to be looked after. They didn’t make their money in financial services and they want to figure out who they can trust to look after them – that is the whole portfolio,” he said, adding that it is difficult to do this efficiently outside of a blind pool.

At the same time, as family offices move into their second and third generations, attitudes towards asset management and wealth preservation are changing. Ford noted that they are starting to think seriously about portfolio construction; a greater focus on discipline, governance and institutionalization is part of this evolutionary process.

“The opportunity is not the small number of families that are willing to make firsthand decisions,” he said. “It is the next level that have a vast amount of wealth and are looked after by independent advisors and private banks.”

When family offices do work with private equity investors, the networking effect can be powerful. Once a manager has secured backing from one family office for a transaction, others from within the same peer group often follow. A key part of the investment process for Armitage and Yorkway Equity Partners – which was established in 2014 by boutique advisor Yorkway Partners to share potential deals with HNWIs – is deciding which investors would be most useful as consortium members.

Yorkway acquired quantity surveyor BMT Tax Appreciation in 2015, working alongside CHAMP Ventures, and the company is now looking to diversify into financial services. One of the investors Yorkway brought into the transaction had previously established a business in BMT’s target segment.

“He has become a true believer and he has been working with them to get that business up and running. Access to that person with that alignment of interest because he is an investor in the business has been invaluable,” said Marcus Lim, a managing director at Yorkway.

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• Topics
• Australasia
• LPs
• Fundraising
• GPs
• Australia
• Family office
• Armitage Associates
• Yorkway Equity Partners