Family Offices Bolster Alternatives

Oct 16 2008 | 12:39pm ET

One group of investors is showing their faith in hedge funds during difficult times. New research by Rothstein Kass says that hedge funds will continue to benefit from increasing asset allocations from single-family offices even as they continue to lick their wounds.

Almost three-quarters of family office currently invest in hedge funds, with nearly 60% of this group planning additional allocations in the coming year. Nearly 70% of family offices with hedge fund allocations report that their investments have met or exceeded performance expectations over the past 12 months and over 80% of respondents reported 24 month performance was “as expected” or better.

Also, more than 70% report “lack of transparency” as a key concern while others (60%) cited lock-up periods, style drift (55%) and fraud (37%) as other major concerns.

“As single family offices consider an ever-expanding range of investment options, they are increasingly turning to the alternative investment sector and its proven ability to deliver superior returns independent of underlying market conditions,” said Rick Flynn, a principal in Rothstein Kass’ family office group.

The research was based on interviews with 146 family offices. Investable assets ranged from $312.2 million to $1.3 billion, with a median of roughly $500 million. Just under 60% of the firms polled are based in the Americas, with the balance operating in Europe (21%) and Asia (20%).

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