Comment: Family Offices, Club Deals, and Fund launch

“A chain always breaks at the weakest link” – many projects in the investment industry can be characterized by this simple statement. As soon as projects are planned, factors such as personnel, networks, and capital play a role, and the discussion about bottlenecks begins at the end. Whether it is club deals in the family office sector or the launch of funds, where many other groups of initiators are active beyond family offices – the discussion often remains similar: Do I move along traditional “paths” or do I look for opportunities to optimize the progress of projects? New experts? New ideas? New investors? These are questions that are often discussed intensively by the players involved. Is there an optimal approach in this area?

Club deals, network, and costs

Many family offices and HNWIs take advantage of the opportunity to make direct investments from their closely defined network. If one considers the organization of such a venture as a project, one finds many successful investment projects of this kind in the market. The advantage is, for example, that the acting actors know each other and have confidence in each other. It should not be underestimated that with this approach, attractive constructions can also be chosen in terms of the cost structure. The private equity industry must face competition too.

A downer in the club deals of qualitatively and professionally high-value investors that were mentioned can be that a lot of optimization potential is often wasted. Existing deal teams often arise from grown connections that cannot be criticized on their own. It is regrettable that one often meets many exceptional investors or can have a very fruitful exchange of ideas with them, or unfortunately, they have not heard anything from the other investors, although in many cases a good master team could have been created. Luckily, solutions in this area for the industry are emerging in parts. In some cases, certain types of neutral multipliers in the market have taken over this function.

Fund launch and fund initiators

Various fund initiators plan their fund as a project, so to speak. Quite consciously the author does not speak at this point in the many successful fund projects in the industry, since these were successful probably apparently from own strength and/or due to optimally activated “network” and perhaps capital resources, see an above-mentioned group of investors. A large proportion of these potential “fund managers” with non-optimal initial capitalization for an optimal fund launch project are initially approaching houses such as Universal Investment, Ampega or Hauck & Aufhäuser, etc. to obtain initial information about the private label fund sector. A large number of the project fails here already “fortunately” if the investment companies do a good job of informing the customer.

In the run-up to the project, it often becomes clear quickly enough that the quality of the management and the given personnel will most likely not be able to compete in the fund world. Mostly these two bottlenecks are often still connected with a lack of budget to support the own fund project over a longer period.

Happy is the fund initiator who was able to pull the emergency brake early enough. More pitiful appear the candidates, who put a lot of effort into the selection of the allegedly “optimal” investment company and during which month after month (up to years) hardly or no talks with real potential investors take place. This type of project exists in large numbers on the market. They often remind us of the image of the seemingly ingenious painter who “shuns” public exhibitions for a long time. It is precisely this practical feedback that would be very valuable at the beginning of the fund project because fundamental mistakes in this process could perhaps still be corrected. The technically perfectly designed fund does not begin a very promising investment story without investor interest in the sense of seed money!

Outlook – perfect solution, not insight

According to the study of an English consulting firm, there is allegedly insufficient communication in “rich families”. Apart from simple disputes, this lack of communication culture can also be found to some extent in the investment industry. One reason can be that one “over-looks the edge of one’s plate, often not with bad intention, perhaps rather unconsciously, since alternatives are hardly known or time and other resources are missing. Of course, it is also possible that external know-how is not in demand due to lack of budget – legal advice, consulting, etc. Whereby it should be noted that external know-how is often not necessary. With a little creativity, own network and know-how sources can be developed.

Club deals, fund requirements, and other forms of “project work” can have the most diverse packaging as their object – closed or open fund variants, direct investments, etc: Optimization potentials may not yet be fully exploited in the area of communication, network, and know-how. Future-oriented appears the question, how the industry solves the confidence problem – if to a large extent product offerers are not accepted as adequate partners for the technical exchange of ideas with investors and fund initiators – how do technically interested market participants find formats of communication, with which selling thinking stands in the background. The most diverse parties in the market seem to be in demand: press, product providers, investors, neutral multipliers in the market. Who can deliver formats that go beyond “simple” product sales and bring together people who should get to know each other to advance the entire industry?


Spread the article

Leave a comment

Your email address will not be published. Required fields are marked *