Direct Investing vs. Fund Managers for Family Offices
Richard C. Wilson narrates a family office education video comparing investing through fund managers with direct investing.
Richard C. Wilson compares two ways a family office can place client capital: through independent funds or directly into companies, real estate and other assets. He describes the work involved in each approach and how an office might decide which one fits its team and the clients it serves.
In this video: Richard C. Wilson (Narrator)
What they said
- Richard on fund timelines. Richard says private equity funds generally invest in their niche during the early investment period. Teams identify opportunities, do due diligence and negotiate, then may work part time with an investment to increase its value.
- Richard on outsourcing. Richard describes investing through fund managers as outsourcing investment decisions to hired experts. He says this can suit smaller family offices that lack the resources to manage specific investments.
- Richard on direct investing's client appeal. Richard says an office with a record and reputation for good direct investments may attract more clients. He says that office may also charge higher fees while providing greater net returns, assuming its recommendations are good.
- Richard on direct investing capacity. Richard says direct investing requires specific skills developed over time, plus oversight of each investment. He notes that internal hiring can raise overhead costs.
In their words
"After the investment is made, someone from the firm may work part time on each investment to increase its value."
"Many family offices are already set up to select and work with fund managers for public markets or indexes, mutual funds, or money market funds."
Why it matters if you are building or preserving great wealth
A client familiar with an industry may want the family office to manage a direct investment in it, while another may prefer a hands-off fund. Richard says a multi-family office can specialize or offer a wider mix of services, while a smaller single-family office may have less room to do that.
From Richard's exclusive Billionaires.com interviews
Lessons from Richard C. Wilson's one-on-one interviews, as published on each interview page.
- Anu Aga: Focus on one main cause. Her family found its giving more satisfying and impactful once it chose primary education for the underprivileged in India.
- Binod K. Chaudhary: Never chase a deal out of desperation. Stay cool and look at every part of the deal. Have your advisers and your finance team review it critically. Your counsel should review it too.
- Larry Connor: Learn from every mistake. Larry's team owns its failures and makes no excuses. They learn, change quickly, and keep getting better.
See the data
Frequently asked questions
Which kinds of funds does Richard name?
He names venture capital, private equity, hedge funds and real estate funds.
How do capital calls work in Richard's example?
The fund requests money when it decides to make an investment. In Richard's example, an investor commits 10 million dollars and has sent 4 million dollars, leaving a commitment for the remaining 6 million dollars.
Sources
Quotes are copied from the video captions and checked against the transcript. Timestamps link to the moment in the video. General information only, not legal, tax or investment advice.