Families want information to help them assess cost and risk of investments. Multifamily office Pitcairn's chief investment officer Rick Pitcairn outlined the future of the multi-client family office as a member of a panel at the Institute of International Research's Family Office Forum in Chicago last week. "Families of wealth have taken the blinders off," Rick Pitcairn told forum attendees in the course of discussing future opportunities for multifamily offices. "Instead of fixating on high returns [when it comes to high-risk and illiquid investments], they are now focusing with a watchful eye that understands multiple levels of risk and requires attentive due diligence." As a result, he added, the multifamily offices that hope to thrive in this more cautious, post-downturn environment will be those that make "transparency of advice" central to all their endeavors. More than money

The main difference between families' view of investments like hedge funds now as opposed to a few years ago is a greater appreciation -- forged by real-world experience -- of the fact that considerations of cost and risk are as important as returns, and that alternatives have to make sense in the context of entire portfolios. "You might be seeing less allocation to alternatives, but not necessarily," Rick Pitcairn told FWR in a post-forum conversation. "What you're definitely seeing is more justification for using them, and a better understanding of them."

But Rick Pitcairn, a fourth generation member of the family that founded and still owns the multifamily office Pitcairn, espouses the view that there's more than investing to managing the wealth of large, multi-generational families.

"Investing is just a piece of the puzzle," says Rick Pitcairn. "Firms that think it's the be-all and end-all lose sight of other issues such as family governance and family dynamics and the passing of power among next-generation siblings that have very little to do with alpha and beta but so much to do with the success of a family in the second and third generations."

Rick Pitcairn, formerly Pitcairn's director of investment strategy, became the firm's chief investment officer early this year. He championed the multifamily office's move in early in 2008 to an all-nonproprietary investment approach in partnership with platform provider Fortigent and overlay manager Parametric -- an innovation that positioned the firm to help its clients to make effective use of 2008 investment losses for tax purposes.

At the end of 2008, Jenkintown, Pa.-based Pitcairn advised on approximately $2.8 billion in assets for 90 ultra-high-net-worth families -- 31 of which are multi-generational, including the Pitcairn family.

Pitcairn's roots reach back to the early 1920s when it was established to manage the financial affairs of the descendents of John Pitcairn, a Scottish immigrant to the U.S. who made a fortune manufacturing plate glass for skyscrapers. -FWR

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