Painting a Picture of the Family Office Investor
The early hedge fund retiree investing in Washington Place
Thesis Driven’s case-based course, Fundamentals of Capital Raising, provides a blueprint for emerging sponsors to raise capital from HNWIs, family offices and institutional investors.
Today’s letter introduces one of the six types of investors profiled in the course. These characters–and the projects they invest in–help emerging real estate sponsors better navigate the real estate capital raising process by providing practical, real-world scenarios that introduce different investors and investment structures and actionable playbooks for raising capital from these groups.
The next Fundamentals of Capital Raising is happening on September 9-10th in NYC. Sign up here!
As we’ve discussed in prior Thesis Driven letters, family offices are perhaps the most inscrutable—yet sought-after—type of real estate investor out there.
So to help real estate sponsors and entrepreneurs understand the family office investor profile, we’ve created a profile of a hypothetical family office investor for our course. Today we’ll introduce Fred, the Family Office Investor, including:
Fred’s profile, role and salary;
His career trajectory to date;
What Fred looks for in real estate deals;
Where to find him and how to get his attention.
Fred’s profile, role and salary
Before we begin, here’s a quick profile on Fred:
Name: Fred the Family Office Investor
Age: 36 (Gemini)
Job: CIO, Jackson Hole Capital ($3 billion family office of Texas oil billionaire)
Location: Jackson Hole, WY
Education: B.S. Mathematics & Computer Science, MIT
Enjoys: Skiing 100 days a year, wine enthusiast, sneaker collector
Fred is the CIO of Jackson Hole Capital, a (fictional) family office that manages $3 billion on behalf of Tom, a Texas oil billionaire and his family.
Fred’s role is primarily focused on managing the family’s investment portfolio, including equities, bonds, private equity, real estate, and alternative investments–developing strategies for how to allocate assets to achieve the family's goals of preserving generational wealth.
He also invests his own money (his own net worth is a modest $80 million) alongside Tom’s family, which ensures alignment and has created a partner-like relationship. Like the family, he gets his pro-rata share of the yield and returns on his own investments, plus a $500,000 base salary and 20% carried interest above an 8% return threshold (much like PE) on the family’s investments.
Fred has allocated 10% of the portfolio—about $300 million—to real estate investments, with a focus on multifamily properties in core markets such as Big Apple City (where Washington Place is located).
Fred’s career trajectory
After graduating from MIT with a double major in mathematics and computer science, Fred was hired as a Quant Analyst at Citadel, a leading hedge fund in Big Apple City.
As an Analyst, he was responsible for building mathematical models to predict market trends and optimize trading strategies. Fred specialized in high-frequency trading (HFT), developing algorithms that executed thousands of trades per second in equities and commodities markets.
Three years in, Fred left to launch his own fund focused on energy and natural gas futures after building a proprietary algorithm to account for the increasing volatility driven by weather-dependent supply and demand trends.
Within the first two years, Fred's fund grew from $50 million in initial capital to over $300 million, achieving a 45% return. He cashed out 28 with a net worth of $80 million.
Fred tried out life as a Wyoming ski bum for a little while until he met Tom—a Texas oil tycoon and billionaire—one day on the chairlift. Tom convinced him to come manage his family’s money (alongside his own), promising him he could still ski 100 days a year.
What Fred looks for in real estate deals
Fred is not a student of private real estate investments and has no experience as a real estate operator (outside of overseeing a few Jackson Hole rental properties he purchased when he first moved out to Wyoming).
And like most family office investors, he is looking at real estate investments through the lens of:
Long-term hold periods
Hedges against inflation
Tax efficiency
Passive investments
Long term hold periods. Fred and Tom are focused on preserving wealth across generations (i.e., money for the great grandkids), and real estate–especially multifamily real estate in primary markets–is often seen as a stable asset that increases in value over the long term that generates steady income that can be reinvested or cover family expenses (without having to touch the principal investment).
Hedge against inflation. Rental income from real estate typically rises with inflation, as lease agreements often include clauses that allow for periodic rent increases. This makes real estate a reliable source of inflation-adjusted income, which is crucial for maintaining purchasing power. Also, the value of the assets themselves generally rise with inflation over time, as the cost of land, materials, and labor increases, protecting the real value of the family’s wealth against inflationary pressures.
Tax efficiency. Real estate investments offer to Fred and Tom many tax advantages, such as depreciation, 1031 exchanges, or opportunity zone investments that can offset the massive tax burdens they have from capital gains across their portfolio.
Passive investments. Fred wants to own real estate and have the ability to see, touch and feel the assets, so investing in REITs is not his preferred vehicle. But he is also not a real estate operator. So he will have to find a trusted operator(s) to deploy capital on his behalf.
(Note: this is why family offices are such sought after investors… like individual investors, they are typically “hands off” and pay high fees (i.e., “2 and 20”); but due to their large AUM, many have the availability to provide to sponsors the single equity check needed for a project, or in some cases a small portfolio alongside the flexibility to hold for long periods of time, if necessary)
Specifically for Fred, he’s decided to seek out operators to back that are targeting value-add multifamily investments in core markets (like NYC), aiming for solid returns in the “low teens to high teens” range but is most focused on unlevered yields–targeting 6-8%. Fred has a long-term investment horizon (10+ years).
So Washington Place will be an ideal opportunity for Fred, especially if he can deploy $30-$50 million through its sponsor and operator, Sam, over the next few years. But unfortunately for Sam, Fred’s decision-making process can be very slow, as he needs to get buy-in from Tom and a few other family members before deciding to back a new real estate sponsor.
Where to find him and how to get his attention
There’s an oft-used joke in family office investing:
If you’ve met one family office, then you’ve met one family office!
In plain English: every family office operates and invests uniquely.
They are each designed around the family’s specific circumstances, interests and agendas. And these agendas can change at any time. So even if Fred told you six months ago that he “likes multifamily deals in Big Apple City”, don’t be surprised if he tells you he “shifted his focus to BTR in the smile states” the next time you connect.
With that said, the secret to getting investment from family offices is to be in front of them–and be in front of them often.
Fred spends most of his time in Jackson Hole, Wyoming, so being a skier and having the resources to spend time in Jackson is one way to try and sit him down for a beer at his favorite watering hole, the Million Dollar Cowboy Bar.
Otherwise, the best place to find Fred—and other family office investors—is at family office conferences. IMN and Carmo are both popular conference circuits for family offices looking for real estate investments.
If you’re going to try and contact Fred via email, then leveraging databases like Fintrx and Pitchbook can be valuable resources for contact information, but expect to pay $10-20k or more for each of them in annual subscription fees (or just attend the Fundamentals of Capital Raising course and get access to family office lists, among other investor lists, templates and resources on September 9-10!).
As for getting Fred’s attention, that can take years. Fred ignores hundreds of cold emails a week from people looking for him to invest in their crypto funds, art marketplaces, debt products, and other multifamily deals. So doing your due diligence, finding creative—and sometimes personal—angles while leveraging your existing network is key to speeding up that process.
In the Fundamentals course we cover detailed strategies to get Fred’s attention at conferences, via cold emails, and through other mediums, alongside similar strategies for Allie the Accredited Investor, Ralph the Real Estate Private Equity Investor, and Hazel the Hedge Fund Manager.
We’ll be publishing more about all these investors over at Fundamentals by Thesis Driven, and don’t forget to sign up for the course!
—Paul Stanton
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A great overview on connecting with family office investors! I’ve had many of the experiences noted and definitely believe in the “If you have met one family office, you have met one family office” quote. And the skiing 100 days a year is definitely a thing. Ha.