Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance
by Kevin R. Mirabile
Family Offices
Family offices are pools of capital managed as a business on behalf of family trusts or estates, such as the Tisch, Rockefeller, and Gates families, to meet the ongoing beneficiary or philanthropic objectives of the founders and their families. These families often hire professional managers to invest their wealth for generations and are both sophisticated and long-term investors who are increasingly looking at alternatives and hedge funds as a necessity to grow the family wealth. This is particularly true given the decline in returns from traditional investing and the risk-reducing properties of hedge fund investing.
According to a recent Barclays Capital research report, endowments, foundations, and family offices, among all categories of investors, allocated the highest percentage of their capital to hedge funds. Insurance companies allocated the least. The top five investors who allocated to hedge funds, according to the Barclays report, were U.S. pensions, U.S. private banks, UK and European private banks, U.S. endowments and foundations, and U.S. family offices.
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