Hedge Funds through a Family Office Lens

Family Office Insider (FOI) | March 2023

Hello, and welcome to this month’s premium edition of Family Office Insider (FOI) from Global Partnership Family Offices (GPFO).

At a glance: Hedge Funds through the lens of the Family Office, based on presentations at the GPFO New Year Investment Club. Summarised by Ben Palairet & Hugo King-Oakley (GPFO), presentations and insights from Caroline Simmons (UBS) and Giuseppe Bivona & Marco Taricco (Bluebell Capital Partners).

The talks covered: the macro backdrop, and analysis of market conditions’ impact on hedge fund strategy performance; the rise of multi-strat funds, with a comparison to FoF; a deep dive into the activist funds; and why Europe may be ripe with opportunities for activists.

The full recordings of the presentations and the materials are available to members via the members portal.

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Family offices allocations to hedge funds.

Family offices often invest in hedge funds as part of their alternative investment portfolio. The UBS GFO 2022 report¹ had family office allocations at 4% of portfolios. Our data² showed ~6.5%. and just 25% of respondents planned to increase or significantly increase hedge fund allocations in 2022/2023. Credit Suisse marked average allocations to hedge funds as low as 1.4% in their dataset.³

The top 3 reasons family offices allocate to hedge funds are outlined below:

• To diversify their portfolio and reduce risk by accessing different strategies, markets and asset classes that are not correlated with traditional investments.

• To seek higher returns by capitalizing on the expertise, innovation and flexibility of hedge fund managers who can exploit market inefficiencies and opportunities.

• To access niche markets and sectors that are difficult to invest in directly or through other vehicles.

However, family offices also face some challenges when investing in hedge funds, such as:

• High fees and expenses that can erode returns, especially if the hedge fund underperforms or has a high watermark clause.

• Lack of transparency and liquidity that can limit their ability to monitor and exit their investments when needed.

The macro backdrop.

Caroline Simmons (UBS) discussed the market outlook and its impact on hedge funds, private markets and commodities strategies. Today we focus on the hedge fund related insights.

Caroline is the Chief Investment Officer UK of UBS Global Wealth Management, and in this capacity regularly presents on the global house view, and the UBS Wealth Way, as well as more specific UK topics and markets. She is a regular media commentator, and frequently meets UBS GWM clients.

Caroline is a strategist based in London, specialising in UK equities. She has 20 years of investment experience and has a background as a UK consumer analyst and prior to joining UBS in 2004 she was a fund analyst. Caroline is a graduate of the University of Oxford, a CFA charter-holder, and holds both the Financial Planning Certificate and the Investment Management Certificate. She recently acquired the Dell EMC Associate in Data Science.