As family offices and their investment strategies increasingly move towards private markets and direct investing, Jon Taylor, Director in Hawksford’s Fund Services team, looks at the growing trend of the ‘fund of one’ and explores the key benefits and opportunities this new approach to investing brings to family offices.
The trend
In recent years, and indeed throughout 2023, a noticeable trend has emerged within family offices as they increasingly adopt private fund structures for personalised investment objectives. This shift signals an evolution in the traditional role of family offices. Amidst macroeconomic challenges and geopolitical uncertainties in 2023, family offices have quietly become a formidable presence in the startup ecosystem, navigating funding difficulties that have affected both new-to-market and established managers.
Despite a turbulent global climate marked by conflicts in Europe and the Middle East, as well as escalating inflation, family offices – largely driven by their long-term investment goals – have proven adept at manoeuvring through these challenges.
The traditional function of a family office involves coordinating a financial advisory team to manage the wealth of affluent families or individuals. While this model remains intact, there’s a noticeable transformation where ultra-high net worth individuals (UHNIs) and families are seeking greater control over their investments and associated management fees.
This evolution has given rise to a new paradigm – a high-performing family business operating alongside the original one. With its own governance, mission, vision, and talent pool, it resembles a professional investment team, akin to an investment firm.
This expanding scope challenges the historical definition of a ‘family office’, and the sector’s traditional segmentation – primarily based on whether offices were single or multi-family – has evolved. New categories such as ‘corporate venture firms’ and ‘principal investment funds’ are now essential to capturing the many diversified roles family offices can play.
However, categorising family offices is not without challenges. Just as every family is unique, each family office catering to the diverse needs of its members must also be bespoke. This complexity underscores the need for an updated and nuanced understanding of family offices in today’s dynamic landscape.
By adopting investment fund structures, family offices stand to gain numerous advantages, including:
- Pooling family wealth within a unified managed framework
- Focusing investment capital to generate a more substantial impact
- Empowering family members, serving as investors in the fund, to determine their extent of involvement
- Ensuring confidential investment opportunities for family members
- Streamlining decision-making and administration processes, potentially resulting in cost savings
- Offering the flexibility to incorporate external third-party capital and investors
Flexible fund structuring
Hawksford has assisted a number of family offices with the establishment of private fund structures – particularly in Jersey, known for its reputation as a leading international finance centre. Jersey’s reputation and proven track record are underpinned by a combination of strategic advantages, robust regulatory framework, and its commitment to financial stability – all of which cater for global clients.
The versatility of the Jersey Private Fund (JPF) is showcased through its flexibility in structure and operation. The JPF, designed to meet the unique needs of investors, can be established either as a company or a limited partnership, providing a spectrum of options for structuring investments.
For family offices seeking a bespoke investment vehicle, the JPF's ability to adapt its structure to accommodate different investment models is a significant advantage. Whether pooling resources in a club investment, establishing a fund for a single family member (fund of one), or engaging in collaborative ventures through co-investments, the JPF provides a versatile platform that can be fine-tuned to match the unique requirements of each family or investor. This agility is crucial in the fast-paced world of finance, enabling family offices to quickly capitalise on market opportunities.
At the outset of establishing a JPF, it’s important to appoint certain key service providers, including onshore and offshore legal advisors and corporate fund administrators and directors. The JPF is required to appoint a Designated Service Provider (DSP), which is usually also the corporate fund administrator.
How we can help
Hawksford is fully licensed to act as a DSP and can assist with the establishment and ongoing administration of JPFs, offering a comprehensive range of administration and support, including bespoke reporting and directors.
Given the flexibility of structure and operation, our fund services can be tailored to the requirements of our clients and their investors. Below are some examples of how we can support you.
- Applying a rigorous, technical and dynamic service, we are particularly well known for our strength in the administration of real estate, private equity, venture capital and other alternative asset classes.
- We build effective working relationships through proactive and transparent communication, client-centric service delivery and a flexible, personable approach.
- We provide added value, working alongside new to market managers.
- We can ease the burden by offering full suite of services, allowing the promoter and investment advisor/manager to focus their efforts and expertise on fund performance.
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