Verifying a fund manager track record before a family commitment
Built on Chapter 10 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
A manager's track record needs to show what the current team actually did. A list of attractive investments can combine assets managed by different firms, small capital introductions, and decisions made by people who will never work on the family's account. I would separate those contributions before comparing returns.
Chapter 10 calls for independent research before the family makes its final selection. For a billionaire office, the work should establish both the performance claim and the person's responsibility for it. A successful asset does not automatically establish a successful investment process.
Ask what their role really was
When examining a claimed track record, I caution investors about a sponsor claiming experience across a collection of properties when some of that experience was only as a co-sponsor bringing a limited amount of capital. I ask whether the person actually managed the assets and carried the lead responsibility.
I would use that point to request a role description for every material deal offered as evidence. Ask who sourced it and controlled the budget and financing. Establish who handled problems when performance slipped. Keep participation separate from authority in the comparison.
Define the record being presented
Ask whether the figures cover a fund, selected investments, or the manager's career across employers. Identify which team members remain and which resources were available at the prior firm. A new partnership may be capable, but it should not imply ownership of another firm's entire operating history.
The family needs a consistent set of inclusion rules. If failed or transferred investments are excluded, ask why and what the complete record would show. Do not let a collection of case studies quietly become a claim about all capital the manager has handled.
Reconcile cash and valuation
Have qualified staff examine the contributions and distributions behind the reported results. Unrealized values require their own explanation. Ask who prepared the valuation, what assumptions it uses, and whether the methodology changed during the reporting period.
Distinguish cash returned to investors from value still held in an asset. Both may be relevant, but they answer different questions. An office funding family distributions needs to know which part of a reported gain can actually reach the account.
Establish what can be independently confirmed
Request supporting records through appropriate channels and confirm the identity of the party supplying them. An administrator's report and a manager-created spreadsheet should not be described as equivalent forms of verification. Each has a different scope.
If prior-employer restrictions limit disclosure, the manager should explain the restriction and propose a legitimate alternative. The office can evaluate the remaining uncertainty. Pressure to accept a claim because the underlying records are supposedly confidential should never close the question by itself.
Look at adverse outcomes
Choose an investment that underperformed and walk through its history. Ask what the original underwriting missed, what the team changed, and how investors were informed. Compare that account with the records available.
A realized loss can reveal sound corrective action or poor control. A profitable exit can also conceal excessive risk. The family should evaluate the decisions and the exposures alongside the result. Otherwise, the selection process rewards whichever manager happened to operate in a favorable market.
Connect past work to the proposed strategy
Experience operating completed rental properties differs from experience developing new ones. A manager moving into another geography or using different financing needs to explain what carries over and what must be built.
Ask staff to identify the part of the record that most closely resembles the proposed fund. The recommendation should describe any material departure. A long career can contain very little direct evidence about the specific task the family is being asked to finance.
The committee paper should distinguish confirmed facts from manager representations and unresolved questions. State what was examined and who examined it. Avoid a broad verified label when only a narrow portion received independent checking.
If a claim cannot be established, assess its effect on the commitment decision. The family can request additional work, change the proposed exposure, or decline. It should reach that decision with an accurate account of the evidence it has.
What to take from this
- Separate responsibility for an asset from participation in its financing.
- Describe verification limits in the committee paper.
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.
Questions and answers
Does co-sponsor experience have value? Yes, when the manager accurately describes the work performed and its relevance.
Should unrealized gains be ignored? They should be examined separately from cash already returned to investors.