Serving the Rise of Direct Investing for Families
“We are committed to stewarding our financial, intellectual, and social capital well for the common good in our communities.” - Weatherford
According to the latest Family Office Guide from EY, the consultant estimated that at least 10,000 family offices exist around the world, more than half of which were established within the last 15 years. During that same time, the number of billionaires nearly tripled, adding more than 1,500 worldwide.
Much of this wealth creation is due to the significant gains generated across both public equities and private capital investments. The combination of record-breaking liquidity in the market, an accommodating IPO market (for profitable companies at least), and aggressive M&A activity by corporations, has allowed many founders, company executives, and their families to convert significant equity value into cash.
To manage this prompt infusion of wealth, families all over the world have begun forming Single Family Offices (SFOs). Structured to meet the needs of each individual family, all SFOs look, feel, and operate quite distinctly from each other. Said another way, if you've seen one family office, you've seen one family office.
If there is any common thread, it’s that most have a strong desire for direct investing. Last year, about 45% of family offices sought to allocate more of their assets toward direct investments in the next 12 months, according to UBS' 2018 Global Family Office Report and in the firm’s 2019 report, UBS quantified that direct investments yielded a 16% return, outperforming the 11% returns achieved through fund investments in PE.
So while the appeal of direct investments is obvious, several obstacles stand in the way.
DEAL FLOW: Developing the necessary relationships with business owners, investment bankers, investment managers, and other circles of influence to generate an attractive pipeline of investment opportunities can be a challenge. Consider, for instance, that a traditional middle market private equity fund -- albeit one with a sophisticated sourcing function -- might participate in over 1,000 in-person meetings in a given year, a fraction of which proceed into due diligence, that will ultimately yield two or three platform investments in a good year.
INVESTMENT TEAM: Building out a team that has direct-investing capabilities can also be exceptionally difficult. The marketplace for experienced talent has never been more competitive, given the number of active private equity firms today (exceeding 7,500, according Bain & Co.) and the pace at which they’re putting capital to work (with nearly $2.5 trillion of dry powder in private equity coffers).
VALUE-ADD MANAGER: In addition to hiring the right professionals to source opportunities and manage due diligence, SFOs also need to develop a truly differentiated way to create value for the companies / investment opportunities they pursue. Family offices with a more flexible investment mandate can often appeal to other founders and entrepreneurs seeking a more permanent funding source. However, if family offices don’t develop the internal capabilities and resources to create meaningful value for acquired companies, they’ll be at a definitive disadvantage to those who can.
In short, establishing direct-investing capabilities on par with traditional PE and venture capital firms is not easy; it requires the development of a differentiated value-creation strategy, robust business development capabilities, and transactional expertise.
A key Weatherford Capital advantage is our strategic alliances that impart synergies to each of the companies under our watch. Our deep relationships and meaningful long-term partnerships across our global network help us source, evaluate, and grow our portfolio companies in pursuit of superior risk-adjusted returns for our investors.
ACCESS: Our deep relationships across business, sports, politics, and finance provides us with a distinct advantage when sourcing proprietary direct investment opportunities and partnering with management teams and industry executives.
DILIGENCE: When evaluating potential investments, we engage all team members and often partner with our network of industry executives and trusted advisors to help drive actionable insights.
EXECUTE: Our trusted relationships and access to asymmetric information drive meaningful strategy(s) and produce compelling business development opportunities, which often equate to transformational growth for our portfolio companies.
Weatherford Capital was founded upon the common belief that Together—we can accomplish more, making a positive impact in the world. We are committed to stewarding our financial, intellectual, and social capital well for the common good in our communities. We believe that we’re not alone, and our strategy to fill the gap of proprietary direct investing for families will continue to persist.
-Drew Weatherford
