There’s definitely no one size fits all when it comes to family offices, as
a panel at the recent Australian Investment Conference 2022 explained. And
the differences don’t just apply to how they’re run, but also to their
philanthropic ventures.
Moderator of the session Michael Walsh, Head of Global Family Offices, ANZ
UBS Australia, says family offices are idiosyncratic,
where each has its own structures and aims – often a reflection of when
they were first formed. “The Myer Foundation, for example, is in its fifth
generation, whereas Grok Ventures has been around six years,” he says. “The
goals for each are very different.”
Private equity favoured by family offices
As part of the session, Walsh cited UBS’ recently released
2022 Global Family Office report, which found PE is becoming a favoured source of return for family
offices. “Private equity’s potential for higher returns and its broad
opportunity set are proving more and more popular,” he says. “We found that
eight out of 10 family offices globally now invest in this asset class.”
That family offices are increasingly becoming the first port of call for VC
raisings and private market transactions is something that was unheard of
10-15 years ago. Panellist John Russell, CEO of Myer Family Investments,
says 35% of its AUM are now PE and VC.
“We favour funds or co-investing – in fact, 50% of our PE/VC investments
are co-investing,” he says. “We don’t invest directly unless it’s into
government assets where we feel more comfortable. We’re also sector
agnostic, which is different to an organisation like Grok that has a strong
passion for a theme.”
Lucinda Hankin, Director, Grok Ventures says the private investment company
set up by Atlassian co-founder Mike Cannon-Brookes has a small array of
investments. “Our remit is to invest in the type of technologies that will
deliver a better tomorrow,” she says. “And decarbonisation is a major
theme.”
Hankin adds that being Cannon-Brookes’ vehicle means it makes sense to
invest in what he’s interested in. “Having a theme has really helped us
especially as we’re a small team of just six,” she says.
Also on the panel was family office Cambooya, which has been operating
since the 1980s and services multiple generations and family groups of the
Fairfax family. CEO Jenny Wheatley says Cambooya has 36 family office
members. “We call them members as they both own us and take advice from us,
so they’re different to clients,” she says. “We have a tailored approach to
all investment structures and a strong governance approach.”
However, Wheatley warns that family offices shouldn’t underestimate the
next generation at their peril. “A report found 70% of heirs will change
their adviser when they come into their wealth,” she says. “This is
important; it’s saying this group wants their adviser to present options
that not only provide returns but also align with their values. These
clients know there are options out there, so we need to deliver what they
want.”
Russell says when it comes to the next generation, having a single company
structure creates simplicity. “Our next generation is aged between 17-48
and is effectively the fifth generation of the family,” he says. “They
don’t hold shares in the company but will at some point. Myer has done a
great job of keeping the one family together and making a significant
contribution to the community over time. If that’s to be sustained, they
need the younger generation to remain engaged and their voices to be
heard.”
Philanthropy: glue for the family office
Philanthropy is an important element of family offices, with many setting
up a separate foundation to drive it. “It’s often said philanthropy is the
glue that holds the family office together,” says Wheatley. “For Fairfax,
philanthropy is in their DNA, and they continue to give back to the
community in dollars and in time.”
In June this year, the 60th anniversary of the Vincent Fairfax
Family Foundation was celebrated, and invitees included 12 of its past
grantees. Since its formation in 1962, the Foundation has distributed
around $200 million. “It’s evident this foundation gives a special type of
joy to all participants, young and old,” Wheatley says. “Our foundation
portfolio is about 95% values aligned – we’re not trying to save the world
but do want to be a good corporate citizen.”
Philanthropy in the Myer world is a lot different to other family
structures, says Russell. “Sidney Myer’s original will left 10% to the
community in which he made his fortune and that gave rise to a different
fund and governance structure that still exists today,” he says. The Sidney
Myer Fund and Myer Foundation have been operational for 90 and 60 years
respectively, working in partnership with Australia’s not-for-profit sector
and other philanthropists.
Meanwhile, Grok Ventures owner, Cannon-Brookes and his wife have committed
to spending $1.5 billion of their personal wealth on both philanthropic
ventures and for-profit investments that aim to cut carbon emissions by
2030.
Pitching to family offices
Russell says if a PE firm is keen to do business with a family office, then
“don’t spray and pray”, instead understand its investment strategy. “We get
about 200 inbound proposals each quarter and have a team of six, so we
don’t have time to go through them,” he says. “You need to do the work
upfront to understand our strategy and appeal to that. Proposals that
state: ‘We’re raising $2m and we’ll give you a board seat’ won’t work with
us. And Australia is not a large place; if you want to do business with us,
you can find us.”
Wheatley agrees with Russell’s concept of “don’t spray and pray”. “And
don’t email us either,” she says. “Our email is overrun. Pick up the phone.
We have a BBQ test where we won’t do business with anyone that our clients
aren’t happy with.”
“For those wanting to do business with Grok,” Hankin says, “it makes sense
to find out who to talk to first. Family offices are private so perhaps
build a relationship with a single family office who can help you gain
access to other family offices.”