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Family offices tackle reporting challenges 

AltaReturn was quoted in a recent Private Asset Management article on the challenges family offices face in reporting.  You can download the full article here.

The rise of multi-generational client families and the growing interest in direct investments has increasingly made reporting a challenging area for the family office space. Andre Boreas, the former chief investment officer for a $700m single-family office and currently head of marketing at technology vendor AltaReturn, described the reporting challenges for large client families. “The patriarch or matriarch might be getting up there in years, they’re maybe sixty or seventy, and they still want the CIO from the family to come to their residence and print out the deck and go through the portfolio,” he said. “But what we are seeing with later generations is that they are so much more in tune with technology, so there is this bifurcation in how generations want to receive information.” The divides go beyond generations, Boreas added. He recalled a time when a family member who, shortly after returning from a personal trip to Japan, became determined to increase their investment in that country. “They wanted to drill down more in terms of what those holdings looked like and how they’re performing,” he said. “I had to figure out a way to get that information to them.”

Reporting concerns with direct investments Compounding these reporting challenges is the growing interest among family offices in making direct investments. Eric Becker, co-founder at Cresset Capital Management, noted that families are starting to tire of the standard two-and-twenty model that is commonly found in the hedge fund and private equity spaces and are instead looking to bypass that type of management structure altogether. “Family offices are coming into their own right now with direct investments and they are becoming an important force there,” he said. Meanwhile Boreas noted that private investors have the potential to be as savvy or even savvier investors than most private fund managers, depending on whether they are investing in industries they know. “A lot of these people built their own business and they know their own industries,” he said. “There’s a certain degree of comfortability.” But while clients can be comfortable running a business, managing those businesses as investments is a different proposition, according to Boreas, who noted that the skillset to run a company and the skillset to manage investments don’t necessarily overlap. “How do you manage that investment? You’re basically a general partner now, so there’s an operational component about how you can supervise your direct investments,” he said. “If you start to do multiple direct investments, now you have a portfolio. How are you going to keep track of this stuff?”

The key to managing these types of investments, according to Boreas, is an emphasis on gathering all of the relevant data. He described the approach of his current firm, which provides a suite of accounting, client relationship management, portfolio monitoring and data reporting services for “really complex” family offices. “We have an online system where you can collect [key performance indicators] for underlying companies,” Boreas said. “[Family offices] use our system for direct investments to collect stuff like sales and sales growth data just like when they were running their own businesses. They know how to do it, but now there are tools they can use to do it better.” Once you collect the underlying data, the rest can be done rather easily. In fact, Boreas noted that a lot of AltaReturn’s platform runs Microsoft programs such as SharePoint and Dynamics. “Microsoft has a really good report writer, you can really design your reports depending on how that family member wants to see their information,” he said.