It's not M&A. It's not private equity. Nor is it hedge funds, nor systematic trading divisions in banks. If you're looking for the most interesting, endlessly variable, exciting and glamorous job in finance, you probably want to work for a family office.
So say those in the know. While family offices used to be turgid places busy with the preservation of ancient wealth or strange places under the purlieu of Russian-style oligarchs, they're now increasingly fun. With 10,000 single family offices globally according to EY, there are still plenty managing old money, but there are also many managing the money of young tech mega-millionaires. The most recent Cap Gemini World Wealth Report predicts that technology firms (and finance) will be the biggest generators of high net worth individuals between now and 2025. Why leave your banking job to work in a small-time tech firm when you could leave to work for a successful tech entrepreneur who wants you to invest in the next big thing?
One former Goldman Sachs managing director who now works in the family office sector says it offers an unparalleled breadth of opportunities: "You can do public markets or private markets. You can hedge funds and real estate. You can even do venture capital. Basically, anything."
This is one reason why the MD says working for a family office is now far better than working in private equity (PE). In PE, he says you're simply more restricted: "You'll get known as an industrials person and then they'll just have you doing industrials deals."
Junior private equity jobs are more mundane than they were. "Private equity jobs have changed," says Andy Pringle at recruitment firm Circle Square. "In the old days, private equity funds would recruit associates and ultimately you'd get to sit on the board of the businesses you invested in. Now, private equity funds recruit analysts from banks and they do the same sort of spreadsheet and modelling work they did before, but more cheaply and across a narrower spread of deals."
Family offices benefit from an absence of outside investors demanding results over a fixed time horizon. While hedge funds like Tudor Investment Corporation have seen their assets under management plummet after 12 months of poor performance and private equity funds typically have a life-cycle of six to ten years, family offices can afford to take things slowly.
"When you're in a family office, the money tends to be very long term," says one ex-equity researcher who now works for a family of industrialists. "It's more like real investing - you get to actually build something, rather than to acquire it, improve it for two to four years and then to think about selling it on, as is the case in PE." A former investment manager who works for a family office says this makes family offices more stable given the current investment cycle: "The timing of the current cycle is creating concerns that private equity returns are unsustainable. Some medium tier PE houses look like bad places to be now."
A combination of low interest rates and ambitious entrepreneurs has made family offices more aggressive in how they invest. Barry O'Callagan, a vice president in prime broking at Credit Suisse, told Bloomberg that family office clients are now more interested in high yield and distressed products. A former fixed income trader who works in a family office tells us they've become more "sexy" in their approach: "The 'low for longer' rates environment pushed many family offices into higher risk-asset classes, such as equities, private equity, infrastructure, (high yield) credit and special situations. It's less about pure, low risk/conservative investing." The ex-equity researcher says his family office rarely hedges its investments: "FOs with entrepreneurial families (as in my case) want absolute positive returns. We don't do any hedging because entrepreneurs/business people are positive by nature. If we see risk, we try to reduce exposure on the liquid side. For example, we'll sell stocks selectively."
It's not just the job though. If you work for a family office, you'll also be there for the lifestyle and...the family.
In some cases, the former can be exceptional. One junior banker who worked for a family office in London boasted that he had a driver and two private jets at his disposal. The ex-Goldman MD says he gets to take the whole of August off and that he's been sailing around for two weeks in Greece in his boss's yacht. Life in a family office is usually less pressured and that the jobs are more flexible: "There are no weekends and no late nights."
The family itself is important and sets the tone. Some can definitely be 'complicated'. Think the Bettencourts who inherited the L'Oreal fortune or the scandals that have beset the Rausings who inherited the Tetrapak billions. Some families will be overbearing. Others will keep you at a distance - you might be managing their money but you won't be part of their life (even if you do holiday in their yacht). "In my case the family is very secretive about what they're doing," says ex-researcher working for the industrialists. "Unless my boss tells me directly that she is/was travelling to X/Y/Z, her secretary will not tell me."
You may, however, get to benefit from the family's broader network of contacts. "I met famous entrepreneurs, A-List Hollywood actors, top models, famous restaurateurs, members of various royal families," boasts one ex-banking junior who joined a family office in London. The ex-Goldman MD says he got to sit at a table with five billionaires. "I just attended my boss's big birthday with 200 guests," says another family office professional.
Because family offices are small and human-focused, no two are the same. If one family gives you use of their jet and lends you their yacht, another will sit you in a small room and wait for you to multiply its wealth. "The term 'family office' is very broad and the industry is quite diversified," says the former trader. If you're getting a job in a family office you need to do some heavy due diligence first. "You need to find the right family," says the ex-Goldman MD. "One who who wants to make money and pay you to do it."
Most times family offices pay less than other buy-side jobs in private equity and hedge funds, but insiders say this doesn't matter. "You won't earn as much in a family office as in a big private equity fund, but it's a better job," says the MD. "It's more flexible with better hours, you get involved in more things and you learn a lot more since the job is more broad."