Our continent is home to more family offices and foundations than any other part of the world. These institutions are companies (limited partnerships, usually) that exist primarily to benefit a particular family (as the name implies). So, if you have a boatload of family cash, you set up an LP rather than manage your holdings individually. There are advantages involving taxation and liability, among others.
Family offices are quite active in the hedge fund space, according to Preqin, with the average family office in North America allocating 14% of its assets to this class.
This community usually likes to keep to itself, but here, you can take a peek behind the usually closed doors of the world of family offices and see how they interact with hedge funds.
Fact 1: Almost half of family offices invest in hedge funds; 48.9% of them allocate to this asset class.
Fact 2: They want more. While the average allocation to hedge funds is currently 14%, the average target asset allocation is a bit higher, at 16.1%
Fact 3: More is better. The average family office is invested in 10 hedge funds, both directly and through funds of hedge funds.
Fact 4: They've been at it for a while. The average family office in North America has been using hedge funds for 15 years.
Fact 5: They tend to stay local. Eighty-six percent of family offices in North America prefer hedge funds on their own continent. Fifty-two percent like global hedge funds, and Europe, emerging markets, and Asia come in at 14%, 12%, and 8% respectively.
Fact 6: Diverse strategies are the norm. The fund of hedge funds approach leads with 53%. Long/short equity follows at 28%, and macro is next with 27%. Distressed and arbitrage strategies are toward the bottom, with 11% and 10%, respectively.
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