1. GenSpring is the nation’s largest multi-family office, which helps oversee about $20 billion in family wealth. Each family has at least $25 million in investable assets and your firm is strictly fee-based, meaning GenSpring is paid only for its advice. What do you see as the biggest change to impact multi-family offices over the last few years?
If you go back to 2008 and 2009, you saw a mass exodus from Wall Street firms. Wealthy families started looking harder for more objectivity and conflict-free advice. The financial crisis helped push many wealthy families to family offices for help managing their money.
The problem with Wall Street firms is their business model. They are product creators. While they may charge an advisory fee, they also get paid by putting you into products. For example, Wall Street firms would charge you for putting you into a private equity offering whereas we wouldn’t. For us, that would be a conflict. In the family office model, all that we have to offer is our advice, so we definitely sit on the same side of the table of clients.
2. GenSpring seems to offer a lot of events for clients. Some of these client events are exclusively for men, while others are exclusively for women. Why?
We like to give women the opportunity to learn without feeling the pressure of having their significant other at the meetings. The learning curve is always different on both sides: men and women. We found men and women become much more engaged when we do separate events like that. Men have an interest in certain things while women have an interest in other things. For women, it may be health or educational planning for their kids. For men, it may be estate planning or governance of their family business. And, there are some common interests, such as investments. Clients pay for their own travel and accommodation, and we pay for the speakers, dinners and events.
3. What portion of GenSpring clients invest in private equity?
We have a pretty high percentage of clients that have some private equity exposure—probably 65 to 75 percent.
4. How much of the $20 billion that GenSpring oversees is invested in private equity?
Private equity represents around 5 percent of the assets we oversee. That amounts to about $1 billion in invested capital. What we do primarily is create a GenSpring fund of funds for our clients. Each of these vehicles, one of which we usually create each year, has a selection of five to 10 underlying managers. So essentially we’re putting together our own fund of funds, with the important distinction that, unlike a typical fund of funds, we don’t charge our clients a fee for investing in that pool.
5. Are wealthy investors afraid of getting funding calls when markets tank, like they did in the financial crisis?
We work on that from a financial-planning standpoint, making sure that our clients have sufficient liquidity to meet funding calls. Most clients that invest in private equity are fairly knowledgeable about how it works. The most difficult part in 2008 and 2009 was when clients were getting funding calls in a very illiquid market. This worried people, not in terms of meeting their capital calls, but in terms of their concerns about whether it was wise to make additional investments in private equity during such a period of chaos. It was tough then to convince clients to continue building out their private equity program. That was the biggest challenge.