The Family Wealth Report Family Office Investment Summit in New York spotlighted the growing appeal of alternative investments and heightened concerns around risk management. Industry leaders emphasized the need for thorough due diligence when selecting fund managers. “Manager selection is absolutely key for success,” said Dan Scansaroli, head of portfolio strategy at UBS Wealth Management.
Opportunities and Challenges in Alternatives
Speakers outlined the advantages and limitations of alternatives. Patrick Kennedy, founding partner of All Source Investment Management, explained that while alternatives can add value, they come with drawbacks like illiquidity, capital calls, and lock-up periods that may extend for a decade. However, ultra-high-net-worth investors with long-term outlooks may benefit from the potential for outsized returns.
Scansaroli pointed out the need to consider the funding source for alternatives, cautioning that using cash may not justify the illiquidity risk.
Private equity emerged as a central theme, described by Kennedy as “the gorilla in the room” due to its rapid growth and long lifecycle of private companies. Advances in technology, such as automation in private equity operations, are also reshaping the sector, noted Ayo Ekhator and Alex Goodwin, co-founders of Bridge.
AI’s Role in Investment Strategies
Artificial intelligence (AI) is increasingly influencing alternative investments. Tal Shahar, CEO of Atlas Invest, discussed how AI’s ability to analyze data and generate insights can enhance decision-making. Shahar highlighted private debt as a key area where AI will initially have the greatest impact.
Addressing Rising Risk Concerns
Rising risks were another major focus, driven by regulatory requirements, data management challenges, and evolving asset classes. Jay Wolstenholme, a strategic advisor at Datos Insights, underscored the importance of improving risk management processes, particularly as firms lose knowledge when employees leave.
The risks tied to data security were also highlighted by Daniel Faddoul, CEO of Auditive, who warned about the dangers of granting software vendors access to sensitive information.
Technological Innovation in Family Offices
Other discussions centered on custom indexing and fund accounting.
- Custom Indexing: Ashvin Viswanathan of Wilmington Trust described it as a tool for achieving tax advantages, personalized investment strategies, and values-based alignment by using separately managed accounts.
- Fund Accounting: Cori Rodda of FWO Accounting and Consulting emphasized its role in enhancing decision-making through real-time data and streamlined workflows.
Despite these advancements, Rodda noted persistent challenges, such as integrating disparate software systems and the tendency for family offices to delay technology upgrades.
The summit provided a comprehensive view of how family offices are adapting to emerging opportunities and risks, leveraging new tools and strategies to navigate the evolving investment landscape.
