The time has come for family offices to restructure their investment staff to meet their goals. In the hopes of achieving higher returns and efficient control over their investment portfolios, most family offices have invested capital into private companies. As a result, private equity talent is being greatly sought by these offices in return for managing their portfolios and a better equilibrium of work-life.
The recruitment of private equity professionals is increasing as family offices secure more money into private capital than investing in outside firms. The end of 2019 brought a massive increase in direct investments by family offices compared to just a few thousand at the beginning of the year, according to the founder of Fintrx, Russ D’Argento. Moreover, a Fintrx report of 2019 showed that almost half of all the family offices in North America relied on direct investments.
Derek Braddock, the co-founder at BraddockMatthews, said that families realize that their assets are decreasing and are choosing to secure in-house capabilities. Recruiters say that even those family offices managing less than $1bn assets would like to make more direct investments. This is because they want to have more control over their investments in private equity firms, and securing talent from there is the key.
Taking a Dip in the Talent Pool
There’s a reason why family offices are recruiting talent from private equity firms–this is because they offer a rich talent pool of trained people that are experienced in securing dealing, handling investments, and have their contacts. Family offices looking to attract such recruits will need to offer the right compensation to retain them. Some of their choices include offering carried interest or a cut of the profit from the deals they complete or allowing them to invest in deals directly together with the family office.
According to Forrest Tempel, a partner at the Reynolds Capital Partners, family offices are now proving to have a better work-life balance and even offer better security of investments. Recruiting from private equity firms also keeps them away from the fund-raising process that private equity firms bring. In addition, family offices can be flexible and offer individuals the chance to explore and be creative with investment deals and form healthy relationships with founders.
Scoping Of Talent Away From the Cities
The pandemic has drawn out people from some of the largest cities, like New York, and has led them to work and enjoy living in expensive towns. The demand for private equity professionals surged after the initial lockdown, and private equity professionals are now looking to work with family offices outside of big cities and investment hubs.
Offering Competitive Incentives
According to Paul Carbone, the president of Pritzker Private Capital, offering the right compensation is crucial when hiring private equity professionals. It can include base pay, carried interests, and even bonuses, similar to a private equity firm. In addition, competitive compensation is vital to retaining staff, and this can be in the form of performance bonuses, co-investments, carried interest, or long-term investments.
As family offices continue to grow and strengthen their investment portfolios, they will need to continue providing incentives to their investment staff to retain them.
