In our 8th episode of the Family Office Vlog Series, Asena CEO Peter Harper will elaborate on our most recent blog post: Family Office vs. Hedge Fund.

Transcript:

Peter Harper: Hey guys. Peter Harper, Managing Director and CEO of the Asena Family Office. For those of you who are not familiar with the business, we’re a multi-family office and we advise foreign family offices and private clients on U.S. direct investments in mergers and acquisitions.

Peter Harper: So, today’s the next video in our family office series. In prior videos, we’ve talked extensively around, you know, the idea of what a family office is; trends around the growth of family offices, and why there’s been such a massive uptick in family offices over the last decade; and this sort of general comparison of where family offices sit in the current wealth management financial services landscape.

Peter Harper: Today, we wanted to talk about the comparison between a family office and a hedge fund. What is a family office? What is a hedge fund? Why are they different, and why do we sometimes hear about the two vehicles, the two structures in the context of one another, right? So, as we have talked about previously, a family office is an operating structure established by a family who has significant capital or recent liquidity to manage all aspects of their life, right? So, this notion of running a family, a family investment mandate like a business. So, they’ll have generally, depending on the size, they might have a full C-Suite. They’ll have capital deployed under a wealth management strategy across public equities and alternative investments such as private equity, hedge funds, fixed income, and venture capital, and then they’ll have a team of folks that manage what we like to think of as complex admin, right? So, all of the issues associated with owning complex non-income producing private assets such as planes, boats, houses, across multiple geographies, and then all of the different elements and things that sort of come with that, with a broader family group, right? So, you know, who do you need as far as specialists to manage those assets? What type of insurance do you need? How do you manage their use and maintenance? And then, you know, circling back to the C-Suite; what are all the ancillary things, you know, to make sure that the wealth is protected and it’s managed in accordance with the long-term objectives of the family.

Peter Harper: I had mentioned that you know, comparatively, I’d mentioned that a hedge fund is a vehicle that a lot of family offices invest in, right? And that’s the major distinction. Whereas a family office is really a single vehicle normally set up for a single family to manage their wealth, a hedge fund is a private investment vehicle whereby an asset manager, an investment manager, executes on a specific, sort of non-regulated investment strategy for a number of sophisticated investors, right? So, it’s the aggregation of unrelated parties’ capital to execute on a particular strategy. Oftentimes, a hedge fund manager, because most of them are very successful and wealthy, will have a significant amount of their own wealth and their own strategy. And the reason why you hear about hedge funds and family offices side by side is because when a hedge fund manager decides they don’t want to continue to manage capital on behalf of external third parties, they just want to run their own money, often as it relates to sort of SEC regulation, they will transition from a hedge fund to a family office, right, because there’s less regulatory oversight. That’s the major distinction between the two. I hope this has been helpful. Cheers, guys.

 

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–Peter Harper