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What’s Left After a Family Business Is Sold?
Aug. 9, 2019 | The New York Times | By Paul Sullivan

Having a pile of money after a company is sold, in place of a company, with all of its stress and complications, would seem like a relief. But a company often holds families together by giving members a shared identity and conferring a status in the community established by previous generations.

Without the company, the family’s perception of itself and its purpose can change, and it is often something that members are not prepared for. Their focus was on running the business and then on the sale; little thought went into what comes next......“The key to doing it successfully is how you prepare yourself and how you prepare your family. It’s really a lifestyle choice.”

If families do not do it right, splitting apart is almost inevitable. “A shared business becomes very much a glue,” ....“When the business is sold, what we see in almost every situation is some family member splits away.” .....Most advisers say the sale of a family business should focus on the transition from operating a company to managing a portfolio of money, not on the money itself. Sometimes the magnitude of the sale becomes an issue for a family’s identity, particularly if the acquisition price becomes public......some families focus more on the money than the traits that made the business successful, and fail to grasp the difference between an operating business and financial capital. ....years before the sale, the family had been formulating a plan for its wealth that focused on family values but also held the members accountable. A family scorecard, for example, tracks their progress on 40 items that the family has deemed important, including working hard, investing wisely and the protecting its legacy.
Mr. Deary said the family used the scorecard to objectively answer the question: “Are we constantly trying to get a little bit better every day at what we do?”

As the wealth stretches out and families grow, those values can become a substitute for the company.
.....continuing education about a family’s values, particularly when the company was gone, allowed successive generations to understand where their wealth came from.

Those values often work best when they are broad — honesty, integrity, hard work — and not so specific that family members chafe. “The loose binds bind best,”

Family relationships can suffer when there are no shared values but strong financial connections, like a large trust or partnership that manages the wealth.
accountability  exits  family  family_business  family_office  family_scorecards  family_values  generations  generational_wealth  heirs  liquidiy_events  money_management  purpose  relationships  Second_Acts  self-perception  unprepared  values  wealth_management 
6 weeks ago by jerryking
Family offices are diving into new markets
August 1, 2019 | Financial Times | by Gillian Tett.

Once, property advisers mainly sold malls to developers, retail groups or banks. Now, however, there is rising demand from family offices. The new owner of Water Tower Place was said to have experience acquiring and managing other “trophy quality, grocery-anchored shopping centers” in the US.

As the Fed and other central banks loosen monetary policy, private pools of capital are searching for ever-more innovative ways to earn returns. ....It is not easy to monitor such financial flows with precision, since the family office sector — which is estimated to control almost $6tn in assets — is highly secretive. However, financiers say that a shift is under way. A few decades ago, the sector (like most asset managers) put most of its money in public bond and equity markets, with a smaller allocation to real estate.

Then investing in hedge funds became all the rage. But a survey conducted late last year by UBS bank and Campden Wealth suggests just 5.7 per cent of family office assets now sit in hedge funds, sharply down from recent years. Meanwhile, the allocation to public markets is also falling, with just 28 per cent in equities and 16 per cent in bonds.

At the same time, investments in private equity and real estate have risen to account for 22 per cent and 17 per cent respectively. This trend seems set to intensify.....“Family offices continue to re-evaluate traditional approaches to investing [with] accelerating interest in making direct investments in real estate and operating businesses.”

This means that family offices are no longer just investing in private equity funds (which are already bloated with cash), but increasingly cutting direct deals. ...The more that elite private pools of capital find juicy returns outside public markets, the more this risks fuelling wealth gaps. After all, most non-elite investors remain stuck in public markets and bank deposits, exposed to the vagaries of low interest rates.

This return gap may be going largely unnoticed now, because private markets are so opaque. However, the difference is likely to grow.
family_office  Gillian_Tett  trends  opacity 
10 weeks ago by jerryking
Weston family hires OMERS managing partner Jim Orlando to invest $100-million in tech ventures
June 19, 2019 | Globe & Mail | by SEAN SILCOFF

Canada’s billionaire Weston family is making a $100-million bet on the emerging-technology sector, hiring away one of Canada’s top early-stage investment professionals from Ontario Municipal Employees Retirement System to run its new venture fund.

Jim Orlando, a managing partner with OMERS Ventures, will join a new arm of the Westons’ holding company, Wittington Investments, to develop “a meaningful corporate venture capital program and strategy...... he will focus on areas of innovation germane to the family’s key corporate interests: baking company Weston Foods, supermarket operator Loblaw Cos. Ltd. and drugstore chain Shoppers Drug Mart Corp., controlled by the Westons’ publicly traded conglomerate, George Weston Ltd.....Wittington has just two disclosed investments in Toronto’s emerging-technology sector, backing digital-health benefits provider League Inc. and venture-capital fund Radical Ventures. George Weston made its first investment in venture capital in 2016, backing a $25-million consumer-products-focused fund managed by Dragons’ Den star Arlene Dickinson, while Loblaw this year partnered with Toronto startup Flashfood Inc. to sell perishable food items nearing the end of their shelf lives through a mobile app.....he Westons join a small but growing group of wealthy families and corporations – including Telus Corp., Power Corp. of Canada, Royal Bank of Canada and OpenText Corp. – to invest in early-stage technology ventures.

Several real estate firms including Michael Cooper’s Dream Unlimited and Dream Office REIT and Cadillac Fairview Corp. Ltd. have committed tens of millions of dollars each to fund innovation in the property-tech market. Other Canadian “old economy” entrepreneurs – including mining magnate Seymour Schulich, property developer Robert Mantella, Vega nutritional supplement maker Charles Chang and Mission Hill Winery founder Anthony von Mandl – have emerged as big financiers of early-stage ventures in recent years.

“No question, [the Westons'] various companies are confronting a good number of significant opportunities and challenges, so there is no shortage of things to focus on,” said Rich Osborn, managing partner of Telus Ventures. “My caution would be, it’s easy to source and structure deals. The hard part is really unlocking the strategic value. That takes a lot more work and time to build that muscle. It will be a learning exercise for them for some time.”
corporate_investors  early-stage  family_office  George_Weston  investors  moguls  OMERS_Ventures  seed-stage  vc  venture_capital 
june 2019 by jerryking
Jeff Bezos’ family office invests in Chilean plant-based food start-up
March 1, 2019 | Financial Times | by Leila Abboud in Paris.

The family office of Jeff Bezos is among the investors in a $30m funding round for a Chile-based start-up that uses machine learning to create vegetarian alternatives for animal-derived products such as mayonnaise and ice cream.

Four-year old NotCo on Friday announced the financing round led by The Craftory, a fund co-founded by consumer industry veteran Elio Leoni Sceti, as well as Bezos Expeditions.....The funds will be used to finance product development and help NotCo expand to Mexico and the US later this year. It sells its plant-based mayonnaise, which is made with chickpeas, in grocery stores in Chile......NotCo has developed a software platform that analyses the molecular structure of foods, such as beef or milk, so as then to derive combinations of plant-based alternatives that most closely resemble the original in taste, colour, and texture. The technology seeks to map the similarities between the genetic properties of plants and their corollaries in animals, so as to more accurately mimic the properties.....“The potential is massive because NotCo is not just a meat-replacement company or a milk-replacement company,”.....The technology can be applied to all foods derived from animals,” he said, adding that if successful, the opportunity was there to create a major food company to compete with the likes of Nestlé and Danone......the approach of analysing the molecular structure of foods to engineer vegetarian versions of meats, cheeses and dairy products is similar to that of US-based start-up Just Inc, formerly known as Hampton Creek.....The company changed its name after a series of setbacks, including an alleged food safety issue that led to it losing distribution at retailer Target. Nevertheless, Just Inc is well-funded; it has said that it has raised $220m from investors.....Venture capital investors have been pouring money into start-ups to create plant-based or lab-grown alternatives to traditional meat and dairy. Impossible Foods — which is backed by Bill Gates and Alphabet’s GV, formerly Google Ventures, among others — has raised $387.5m,
Chile  Chileans  Danone  family_office  flexitarian  food  Jeff_Bezos  machine_learning  Nestlé  plant-based  start_ups  vegetarian  vc  venture_capital 
march 2019 by jerryking
JAB’s Peter Harf: hire ambitious talent and give them a mission
February 16, 2019 | | Financial Times | by Leila Abboud and Arash Massoudi.

JAB oversees its portfolio of coffee, beverages, and casual dining companies. .....When everything was going wrong last year at Coty, the cosmetics company backed by investment group JAB Holdings, Peter Harf reacted with characteristic ruthlessness, replacing Coty’s chief financial officer and chief executive, and taking back the Coty chairmanship from his longtime associate, Bart Becht. Describing last year’s share price decline of more than 60% as “unacceptable” for JAB and its co-investors, Mr Harf says the situation “had to have serious consequences” even for his inner circle......Harf believes that identifying talented people — and incentivising them through performance-based pay — have been key to his success over his nearly 40-year career..... just as important to Harf is knowing when to jettison those who are no longer serving the mission he has overseen since he was 35: growing the wealth of Germany’s reclusive Reimann family who are behind JAB....Harf's vision was for JAB to be modelled on Berkshire Hathaway, the investment conglomerate built by his idol, Warren Buffett. Success would come not only from backing the right leaders but by patiently building brands, embarking on deals and taking companies public to cash in on bets....Harf felt he had assembled a dream team: “My mantra has always been that I need to hire people who are better than me. Lions hire lions and sheep hire other sheep.”

Three questions for Peter Harf
(1) Who is your leadership hero?

“Warren Buffett. Hands down. All this stuff that I intend to do to make JAB into a long-term investment vehicle, he does it to perfection. He’s the greatest investor in the world, and I want to be like him. If we invest as well as Warren, we’ve won. Very simple.”

(3) What was your first leadership lesson?

One of my biggest role models was Bruce Henderson, the founder of Boston Consulting Group. When I worked for him, I prepared a three-page analysis about a problem. It had 10 bullet points as the conclusion. He dismissed it as way too complicated and said: “Don’t try to field every ball.” He meant that if you wanted to be a good leader, you have to be able to focus on the important stuff first.
+++++++++++++++++++++++++++++++++++++++++++++++++++
The trouble often starts when leaders start listing five or seven or 11 priorities. As Jim Collins, the author of the best-selling management books “Good to Great” and “Built to Last,” is fond of saying: “If you have more than three priorities, you don’t have any.”
BCG  Berkshire_Hathaway  beverages  casual_dining  coffee  commitment  CPG  dealmakers  deal-making  departures  exits  family_office  family-owned_businesses  HBS  hiring  investors  JAB  Keurig  lifelong  mission-driven  private_equity  portfolio_management  ruthlessness  talent  troubleshooting  Warren_Buffett 
february 2019 by jerryking
How the 0.001% invest - Investing and the super-rich
Dec 15th 2018

Global finance is being transformed as billionaires get richer and cut out the middlemen by creating their own “family offices”, personal investment firms that roam global markets looking for opportunities. Largely unnoticed, family offices have become a force in investing, with up to $4trn of assets—more than hedge funds and equivalent to 6% of the value of the world’s stockmarkets. As they grow even bigger in an era of populism, family offices are destined to face uncomfortable questions about how they concentrate power and feed inequality......Every investment boom reflects the society that spawned it. ....The rise of family offices reflects soaring inequality......But since the financial crisis there has been a loss of faith in external money managers. Rich clients have taken a closer look at private banks’ high fees and murky incentives, and balked......Family offices’ weight in the financial system....looks likely to rise further. As it does, the objections to them will rise exponentially....that family offices have created inequality. They are a consequence, not its cause. Nonetheless, there are concerns—and one in particular that is worth worrying about: (1) The first is that family offices could endanger the stability of the financial system. (2) The second worry is that family offices could magnify the power of the wealthy over the economy.(3) that family offices might have privileged access to information, deals and tax schemes, allowing them to outperform ordinary investors.

The answer is vigilance and light. Most regulators, treasuries and tax authorities are beginners when it comes to dealing with family offices, but they need to ensure that rules on insider trading, the equal servicing of clients by dealers and parity of tax treatment are observed. And they should prod family offices with assets of over, say, $10bn to publish accounts detailing their workings. In a world that is suspicious of privilege, big family offices have an interest in boosting transparency. In return, they should be free to operate unmolested.
diversification  family_office  finance  financial_system  investing  investors  money_management  the_One_percent  upper_echelons  high_net_worth 
january 2019 by jerryking
The Oracle of Boston - Seth Klarman
Jul 7th 2012 | Boston

A scanned version of “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor” has been circulating around trading floors. One hedgie likens Mr Klarman's book to the movie “Casablanca”: it has become a classic......Mr Klarman still runs Baupost like a family office. He is extremely risk averse; his primary goal is not stellar returns but preservation of capital.......He has deliberately maintained a sticky investor base composed almost entirely of endowments, foundations and families, which understand his investment philosophy and will not redeem after a few negative quarters.
Boston  hedge_funds  investors  investing  margin_of_safety  Seth_Klarman  value_investing/investors  books  Baupost  family_office 
january 2019 by jerryking
JAB chair Bart Becht quits in split with partners
January 14, 2019 | Financial Times | Leila Abboud in Paris and Arash Massoudi.

Bart Becht's departure is the first outward display of tensions within JAB, created to manage the wealth of Germany’s billionaire Reimann family. The chairman of JAB Holdings, the acquisition-hungry owner of Pret A Manger and Keurig Dr Pepper, has quit after a five-year $50bn takeover spree led to a split with his two partners over the scale of the investment group’s dealmaking.

According to two people with direct knowledge of his decision, Bart Becht, a hard-charging 62-year-old consumer industry executive, stepped down after failing to convince JAB to scale back its takeover ambitions to focus on improving operations at its sprawling portfolio of companies.....The once-obscure investment vehicle has vaulted itself into the top tier of consumer products groups through acquisitions of high-profile US brands like Krispy Kreme, Peet’s Coffee and Covergirl owner Coty, competing directly with industry giants including Nestlé and Coca-Cola in coffee and L’Oreal in make-up......One person who has worked closely with JAB described Mr Becht’s decision as “undoubtedly a surprise”, especially since the trio of executives had only recently been raising money from outside investors and pitching themselves as long-term investors.

JAB operates in a similar way to a private equity investor, but with much longer time horizons. It is often willing to own portfolio companies for decades, often engineering an expansion via acquisitions.....The fundraising also coincided with a strategy shift as JAB exited investments in luxury and fashion to focus on what it calls premium food and beverage, casual dining, and coffee.
CPG  dealmakers  departures  exits  family_office  family-owned_businesses  hard-charging  investors  JAB  Keurig  private_equity  portfolio_management 
january 2019 by jerryking
How the 0.001% invest | Hacker News
I've seen the portfolio's of dozens of family offices (I worked at a portfolio analytics company so I had free reign to snoop around), and none of the offices seemed competent. The returns were terrible and the portfolio construction laughable.
Instead of striving for out performance, the funds just catered to the whims and idiosyncrasies of the family. Also, many of these funds were too small to make sense, AUMs from like 150MM-500MM. They would have be much better off just investing in a hedge fund, but the family's ego didn't allow them. I think the point was to show off more than anything else.

One of the exceptions was Sergey Brin's family office, which managed a shit-ton of money and had some good people who actually knew something about portfolio construction.
family_office 
december 2018 by rnschmidt
Family offices are in a talent grab for young impact investors
OCTOBER 15, 2018 | Financial Times | Madison Darbyshire.

While the number of family offices managing assets at this scale is small — assets under management of a family office average about £300m, says Heather Jablow, head of global private client practice at Cambridge Associates — the trend of family offices turning to impact investing is growing — and quickly.

Some $22.89tn in assets were held globally in socially responsible investments as of 2016, up 25 per cent from 2014, according to the Global Sustainable Investment Alliance. Many family offices see impact investments, such as environmental funds and fossil fuel alternatives, as logical, smart investments for the future.

“If it were just about values, it wouldn’t have the legs that it has,” says John Goldstein, a managing director with Goldman Sachs Asset Management, who focuses on impact.

As impact investing becomes a priority for younger generations, family offices are becoming a more desirable destination for recent graduates looking to work in finance. Deserved or not, “it’s almost like family offices have this kind of halo now because they’re doing sexy things with their capital”,......Sometimes family offices hit upon an investment strategy that is so successful that they look to create funds around that strategy. Take the Wimmer family office, for example, which takes a three-pronged approach to investing. Its investments include property, SME lending, exchange traded-funds and investing in external hedge funds to yield what it calls an attractive return for its level of risk.
family_office  halo_effects  high-impact  impact_investing  mission-driven  social_impact  talent 
october 2018 by jerryking

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