Private Equity Best Practices: Understanding Family Offices – Part 1

What is a Family Office

Definition and Purpose: A family office is a private wealth management advisory firm that serves ultra-high-net-worth individuals and families. Unlike traditional wealth management shops, family offices provide a holistic solution to managing the financial and investment needs of affluent clients.

The Rise of Family Offices

Historical Background: The concept of family offices can be traced back to the late 19th century when the Rockefeller family pioneered the establishment of dedicated offices to manage their wealth. Over time, family offices gained popularity, particularly in the 1980s, and have witnessed exponential growth in recent years.

Factors Driving Growth: Several factors have contributed to the surge in family offices. The increasing concentration of wealth among ultra-high-net-worth individuals, driven by the success of hedge funds, private equity, real estate, and tech entrepreneurs, has created a demand for dedicated wealth management solutions. Additionally, the desire for privacy, customization, and professional management of assets has further fueled the growth of family offices.

Types of Family Offices

Family offices can be classified into three main types: single-family offices (SFOs), multi-family offices (MFOs) and hybrid family offices (HFOs). 

Single-family offices: SFOs serve one ultra-affluent family, providing personalized services tailored to their specific needs.

Multi-family offices: MFOs serve multiple families, leveraging economies of scale to offer cost-effective solutions. 

Hybrid-family offices: HFOs are professional organizations that combine the benefits of a single-family office, a multi-family office, and external asset management services. HFOs provide comprehensive financial and wealth management services to high net-worth clients while allowing for flexibility in addressing their specific needs. The principles of an HFO typically co-invest along with their investors. Benevolent Capital is an example of a hybrid family office.

Benevolent Capital

At Benevolent Capital we have carved a niche for our investors by seamlessly blending traditional family values with cutting-edge investment strategies. Our approach is characterized by a thoughtful fusion of innovation and prudence, ensuring that every investment aligns with the long-term vision and legacy goals of our clients.

As principals we co-invest our own money in every deal we participate in, we do not charge our investors management fees, investors receive a 100% preferred gross return on their investment. After the 100% return (a 2X) the investor will receive a 70% net return with a 30% promote to the GP. This arrangement makes Benevolent Capital a trusted partner in safeguarding and growing wealth for our investors.

Benevolent Capital includes a world-class group of partners, associates and investors, and our portfolio now spans catalytic investments in venture capital, private equity, real estate development and a diverse collection of global professional soccer franchises. Our wide range of experience from managing successful companies, to completing management buyouts, acquisitions, and a wide variety of debt and equity investments totaling over $4 billion enables us to truly partner with the entrepreneurs and management teams of our portfolio companies and provide hands-on support and guidance towards realizing their full potential. Benevolent Capital has a proven track record of successful investments. Notably, our $200k investment in seed capital for Enzymatics, a biotech firm later ultimately acquired by Invitae (NASDAQ: NVTA), has yielded over $30MM in total returns for Benevolent Capital’s investors.

What sets us apart is not just our financial acumen but also our dedication to fostering meaningful relationships. Going beyond conventional investment practices, we prioritize open communication and transparency that allows us to build trust with our stakeholders, as principals we co-invest our own money in every deal we participate in making Benevolent Capital a trusted partner in safeguarding and growing wealth for our investors.

In an ever-evolving financial landscape, our expertise, coupled with Benevolent Capital’s commitment to hybrid family office investments, paints a picture of success, where financial prosperity meets enduring values.

About the Author

Brett M. Johnson, founder and CEO of Benevolent Capital, founder and partner of Fortuitous Partners, and co-founder and chairman of Rhode Island FC. He has a bachelor’s degree from Brown University and a Masters of Business Administration from the Presidential/Key Executive program at Pepperdine University. Brett is also a graduate from the Harvard Business School’s President’s Leadership Program in 2014. An active member of the Young Presidents Organization.

Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Always consult with a qualified financial advisor or wealth manager before making any investment decisions.