Starting an investment fund can be an intense and arduous process. Emerging managers can face a steep learning curve when navigating investor relationships, particularly family offices. While family offices can be valuable partners, understanding their priorities and investment goals can be challenging. Our consultants help managers engage with family offices, including advice on what strategies they're looking for, how to present your firm, and best practices for building effective relationships.
A clear and compelling investment strategy
As an emerging manager, it's essential to recognize that family offices are typically focused on long-term growth and preservation of capital, minimizing risk, and maintaining a high level of engagement.
Family offices seek investment opportunities that align with their goals and values. This means emerging managers must have a well-defined investment strategy communicated and supported by robust data. Be sure to articulate your approach to risk management, including how you identify and mitigate risks.
Demonstrate a track record of success
While emerging managers may have a short performance history to draw on, there are still ways to demonstrate your ability to generate returns. Consider providing examples of investments you've made and how they've performed. Even with a small track record, you can still highlight your expertise in a particular industry or geographic region. Throughout the fundraising process, capital providers will need to assess if your strategy is sustainable and can endure through market cycles.
Leverage your network
Family offices often rely on referrals and recommendations from trusted sources when evaluating investment opportunities. As an emerging manager, use your personal and professional networks to build relationships with family offices. Attend industry conferences and events and seek opportunities to connect with potential investors. By engaging with your network, a new manager should be able to close roughly 20% of their LP calls into fund investments.
Build trust through transparency and communication
Successful partnerships are built on trust, grounded in transparency and communication. Be upfront about the risks associated with your investment strategy, and provide regular updates on performance and market conditions. Quarterly and monthly letters are valuable for institutional investors to understand how a manager thinks and views the world.
Finally, it's essential to recognize that family offices have specific requirements around investment minimums, fee structures, and reporting. As an emerging manager, you may need to be flexible to accommodate these needs to secure a seed or anchor investment.
