From Hedge Fund to Family Office

10-Dec-2013

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.







By Russ Alan Prince, Forbes,

Some hedge fund managers have transformed their hedge funds into family offices. This year Melissa Ko’s Covepoint Capital and William Collins’ Brencourt Advisors have made the transition. Some more notable names such as George Soros, Carl Icahn and Stanley Druckenmiller have also converted their hedge funds into family offices. And, Steve Cohen may very well be doing the same with SAC.

There are a number of reasons for this and one that’s at the top of the list is the increasing regulatory environment. According to Richard Flynn, principal, the Rothstein Kass Family Office Group, “Unlike hedge funds, family offices don’t need to register as investment advisers with the US Securities and Exchange Commission. This enables them to manage the monies of the founding family and employees without the same level of governmental oversight.”

But there are other motives for successful hedge funds to consider the structure as well. “A family office isn’t as constrained by investment objectives as a pure-play asset manager,” says Hannah Shaw Grove, a family office expert and board member of the Hedge Fund Association. “Other family priorities such as tax efficiency, philanthropy and asset protection can be considered and more fully accommodated in the investment process than they might be otherwise.”

For a hedge fund to cost-effectively convert to a family office and maintain the structure, the monies in the fund that belong to the founding family and the employees must be considerable. So, if a hedge fund is dependent on investor monies to operate, the family office option isn’t viable. The general consensus among hedge fund managers is that about 10% to 15% of the general partners of hedge funds are financially able to convert to a family office.

For some hedge funds the conversion into a family office will be focused primarily or exclusively on investment management, while others are looking to embrace a more expansive platform that does a better job meeting the complete needs of the hedge fund principal and his or her extended family. “Advanced planning, lifestyle services and project management are high on their agenda,” explains Flynn. “With their emphasis on investing, these other sets of services are, to varying degrees, outsourced.”

What’s evident is that with heightened regulatory scrutiny of hedge funds, a percentage of the wealthy general partners will opt to change their funds into family offices. For some the family offices will be just investment vehicles, while other hedge fund managers will incorporate a broader array of services into their family offices.

“A high-functioning family office is appealing to other wealthy families. I’ve seen dozens of single-family offices become multi-family offices once their strategy and structure have been fully vetted and implemented,” says Grove. “It’s a good way to share overhead costs and, depending on the model, could also generate revenue.”


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