Company Profiles
London-Based Family Office Says Industry Professionalism Rises
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The business of running family offices money is becoming more professionalised, a recently-hired CIO of a UK-based organisation says.
The independent and family office segment of the wealth sector is
becoming increasingly professionalised. Clients demand a more
sophisticated and transparent offering, a recently-appointed
chief investment officer argues.
Capricorn
Private Investments, the private investment office of the
Capricorn Group, a family-owned investment business, recently
recruited Manoj Soni as its chief investment officer. He was
previously managing director and head of Credit and Absolute
Return at Partners Capital in
London.
“More and more sophisticated families are moving capital away
from the banks. Many feel big organisations are just too
bureaucratic to offer personal, tailored services. The banks can
also have conflicts of interest when it comes to the investment
solutions they suggest. Consequently, the trend is for families
to move capital towards independents or their own operations. One
good recent example is Talisman (the Pears Family Office) hiring
the senior team from Cambridge University Endowment Fund,” Soni
told WealthBriefing in an interview.
“We feel the investment landscape has shifted dramatically in
recent years, driven by a number of factors such as technology
change and the sheer increase in the level of assets under
management in areas such as hedge funds and private equity,” Soni
continued. “The growth of the internet and cloud computing
leading to improved data dissemination and analysis, combined
with other drivers such as large increases globally in the number
of finance professionals, has led to a much tougher environment
to generate excess returns not only in more traditional asset
classes such as listed equities, but also areas that were once
considered alternative such as mainstream private equity and
hedge funds,” he said.
“Therefore, it makes sense to take certain exposures via a
cheaper passive approach – for example large-cap US equities or
government bonds are better held via low-cost passives. We don’t
see this trend reversing, and so ETFs or passive funds will be a
critical tool for us” he said.
“We believe in combining that core of low cost passive beta in
equity and fixed income markets with idiosyncratic
alpha-generating opportunities, such as Capricorn and third-party
led co-investment deals. We have, for example, recently partnered
with a well-known technology entrepreneur to seed a venture
capital fund targeting disruptive technology businesses in the
UK, Europe and Israel. We have also made direct private equity
investments alongside our cornerstone partners in both early
stage deals and more mature co-investments with larger financial
sponsors like Apollo and Blackstone where we have preferential
access,” Soni said.
“The team also spends a lot of time meeting specialist
third-party managers in less trafficked areas of private credit,
venture capital and private equity. For example, we have invested
in a life settlements fund in the US, and are considering options
in others areas where liquidity constraints drive up potential
returns (e.g. litigation finance and lending to LPs who have
committed capital to illiquid private equity programmes),” he
said.
Given Capricorn’s business model, an issue that arises is how do
managers sift through the array of funds and investment
opportunities seeking to catch their eye?
“When we do meet managers we look for things such as a strong
demonstration of alignment from the manager. We also look to
cross-reference managers with investors who are similar to us
(indeed many opportunities come via our network), and managers
who charge clear and fair fees. It is a challenge finding
appropriate managers or opportunities given where we are in the
cycle. The talent does still exist, but many asset classes
are fully valued which limits future returns right now,” he
said.
CPI advises on about $350 million of capital from its cornerstone
clients. Soni said that the majority of their families have total
assets of between $25 million and $250 million. These are “big
enough to be meaningful, but not necessarily big enough to hire
their own investment team. For example, we are talking to a
number of entrepreneurs who have recently sold businesses where
we are essentially playing the role of their `Outsourced Family
Office’ allowing them to concentrate on their core business which
is what they do best,” he said.
A question such firms face is how scalable they are without
losing that personal touch. Soni said Capricorn aims to maintain
20 to 25 deep relationships of “meaningful size”. “Scale for its
own sake is not an objective,” he said.
With Soni’s arrival, CPI is now extending its offering to a
larger group of private investors and families with whom they are
aligned in goals and values.
Those values are critical to the team, Soni said, adding that
CPI’s “very strong family office culture of partnership, trust,
transparency and patience” were the main reasons he joined the
firm and he thinks that they will stand it in good stead in the
future.