The Future of Family Office Investing
Apr 3, 2023
Last week, Columbia Venture Community hosted an event on private market investing that featured a panel on family office investing. The panel included our own Greg Marchese, a director at Equi, alongside Kavita Patel, principal at MUUS Climate Partners, which is the climate tech venture capital arm of MUUS & Co., and Rami Idriss, managing director at Aurora Asset. The discussion was lively and insightful, and several key themes emerged that shed light on the current macroeconomic environment and family office investing.
Theme 1: Capital Control
One of the most interesting topics discussed was the importance of having increased control over your investments during times of volatility. Family offices increase control in various ways. Equi does so by leveraging its own proprietary hedging program, which protects our portfolio from downside risk in real-time. We also create our own proprietary internal strategies, which are blended with external strategies to increase diversification and reduce correlation with public markets. At MUUS Climate Partners, increased control is achieved by investing directly into climate technology companies vs. investing into climate funds or public equities within the climate sector.
Theme 2: Protecting Against Inflation
Inflation was another issue that was heavily discussed as it has impacted all types of investors — retail and institutional. The panelists discussed the challenges posed by inflation and how family offices are adjusting their investment strategies to mitigate these risks. All panelists agreed that there is now a heightened bar for allocating capital in today’s market and that all investments must be underwritten to higher returns. The search for alpha will be increasingly competitive as interest rates continue to rise.
Theme 3: Liquidity and Investment Horizon
The panelists also highlighted the importance of flexibility on investment horizons. While all panelists agreed that market timing is not necessarily advisable, they had different approaches to ensuring that they could capture the upside to market volatility. One family office is stated that they are investing almost entirely in venture capital and increasing their investment horizon in order to ride out volatility, while others are moving away from oil and anything that depends on the Saudi economy. While other panelists are focusing on increasing their investment horizons, Equi has opted to continue to optimize for liquidity since it serves many investors rather than a single family. In order to do so, it has created proprietary volatility strategies that are designed to capture alpha based on movements of the market itself.
Overall, the event provided interesting insights into the current challenges and opportunities facing family offices today. As the industry continues to evolve, it will be interesting to see how family offices continue to adapt and seek alpha in today's dynamic market.