Family offices want all-weather, long-term-focused investment portfolios like those of endowments and foundations, but the process to build them might not be what offices envision.
The typical office has a couple of hundred million dollars in assets and a staff of a dozen or fewer people. Some employees might be focused on investing; deciding on a strategic allocation, choosing managers, and investing directly in companies and other opportunities (the number of invitation-only investment networks, along with their memberships, continues to grow to satisfy their appetites). Meanwhile, institutional investors with portfolios similar in size are moving in a different direction and delegating more of their investing to other professionals.
Many institutions already lean on outsourced chief investment offices, according to part of the Cerulli Associates 2024 OCIO Providers Survey published Tuesday. Out of 287 university endowments with between $100 million and $250 million in assets, 60% have relationships with OCIOs, and out of 127 endowments with $251 million to $500 million in assets, 51% have relationships. The same research showed that 35% of foundations with $100 million to $500 million in assets also worked with an OCIO.
Still, the trend to rely more on OCIOs is evident. Among the institutions survey with more than $100 million, 40% using an OCIO said they previously managed their portfolio with an internal investment office and more institutions are considering doing the same. During the past two years, 80% of search consultants for OCIOs saw an increase in searches from endowments and foundations, especially the ones with between $100 million and $250 million in total assets, according to Cerulli.
OCIO-managed U.S. assets reached $2.9 trillion at the end of 2023 and Cerulli projects the total will be $4.2 trillion before 2028. The OCIOs obviously recognize this and almost all of them surveyed (91%) said endowments and foundations were “very important” to growing their businesses. Fifty-six percent said the same thing about health and hospital systems.
The fourth category of investor deemed very or somewhat important by 76% of OCIOs was “private wealth.”
Like smaller endowments and foundations, family offices are facing similar investing challenges, and the professionals who work for and with them expect more offices will turn to OCIOs.
Endowments and foundations are allocating more to alternative investments, which can deliver better and or uncorrelated returns. (The alts market doubled during the past decade to $15 trillion in 2022 and is expected to grow to more than $24 trillion in 2028.) But the 1,150 endowments and foundations with $100 to $250 million in assets are allocating just 20% of their portfolios to alts, according to Cerulli, and they desire to allocate more private equity and credit, venture capital and other asset classes like their larger peers. E&Fs had a weighted average allocation of 35.4% to alternative investments in 2024, according to Preqin.
Family offices are also boosting their percentages to alternative investments, or that part of their portfolio is evolving. So, like endowments and foundations akin in size, offices are seeking expertise to help them manage the complex portfolios.
Growing appetites for alts have been buttressed by public market performance in recent years, Matt Chellgren, a managing partner at Bellefonte Advisors and previously the CEO at a single-family office with more than $1 billion in assets, told Modus. In 2022, both stocks and bonds fell, and investors became more interested in uncorrelated assets. More recently, investors have been wary of rising inflation, a run-up in stock prices, and higher volatility.
"If family offices in the $100 to $250 million range want to understand complex alternative investments that are a growing part of their portfolio, they will likely look to OCIOs to help them," Chellgren said.
Endowment and foundation engagement with OCIOs doesn’t fall meaningfully unless they are large. Only 20% of E&Fs with more than $500 million in assets and 15% with more than $1 billion work with OCIOs.
Michael Ashmore, CEO of Rondeivu, an investment technology platform that helps institutional investors source, diligence, transact, and monitor investments across private markets, has witnessed the challenges that family offices are facing. Large offices could be a fit for Rondeivu’s sponsor-investor matchmaking. But for smaller institutions, and most family offices, its OCIO or advisory services are proving more appropriate, he told Modus.
Ashmore is also the chair of the finance and investment committee at the University of Waterloo, and leads the committee overseeing $572 million in endowment assets. He was previously the director of the external managers program at OMERS, the $96 billion Canadian pension plan, from 2015 to 2020.
“Family offices should be introspective, thoughtful and really goal-oriented,” Ashmore said. In many cases, “an OCIO, or an advisory firm, can help them implement their goals in a much more efficient and effective manner.”
Investors with portfolios as large as $5 billion can often still benefit from partnering with an OCIO to gain better access to certain managers and investments, and improve performance and efficiency, Chris Swansey, associate director at Cerulli, said.
However, other factors go into the decision to outsource investment management. Craig DeLucia, CEO at Broward Grove, a firm that supports multiple family offices (primarily connected to the same wealth-creation event) in parallel across four generations, said two types of families are engaging OCIOs: Those with roughly $300 million in assets or less, and those approaching, or in the process, of a generational transition.
Some family offices don’t have the scale, skillset, time, desire, or some combination of those to build a portfolio entirely on their own, so they seek the help of OCIOs. Outsourcing investment management to an organization should also mean better continuity. Replacing an investment professional can be hard for family offices, which struggle to find talent. An OCIO can more easily backfill a role. “A true OCIO can bring some longer-term stability,” DeLucia said.
The other group of offices has family members who either realize they don’t have the investment experience of the previous generation, or the best use of their time is to act as governors or stewards of the wealth at a high level, rather than trying their hand as portfolio managers.
As families grow, members in charge of the office also realize that managing investments for their kin can be a challenge that isn’t worth it, DeLucia said.
Imagine that cousin you don’t get along with. Now imagine seeing that cousin after — at least from their perspective — losing their money.
“Managing your own family's money is fraught with peril. It's harder than managing other people's money because other people don't show up at your 4th of July barbecue, and your kids' orchestra concert, and Christmas Eve dinner, and that sort of thing,” DeLucia said. “There can be real benefit to family relations to use an OCIO, not at the exclusion of the family, but under the governance and direction of the family.”
Michael, you're a successful entrepreneur with your own family office. Why start Copia?
I felt like all the family office tech had it backward. Everyone was focused on manager convenience rather than owner's control. I wanted to drive my own decisions without needing everything to be a weekend project where I log in to 20 different systems to copy and paste data into a spreadsheet. We joke that there is more advanced software for picking a movie with your family than managing the family wealth. That seemed crazy to me.
Copia also works with wealth management firms and other clients, right?
Oh yeah. We've partnered with several RIAs and MFOs who see the same problems. Managing alts creates pain and friction that Copia solves, regardless of an organization's structure. If you’re fighting with alternatives, spreadsheets, portals, fragmentation, email, and managers, Copia simplifies all of it. We like to say we put assets under intelligence instead of assets under management.
What has changed since you founded the company four years ago?
Our early bets on AI are paying off in ways I didn't fully anticipate and the pace of change is wild. What's super interesting is how quickly the skepticism has gone away. I've spent a lot of time talking to firms that were super bearish on the capabilities but are now seeing the potential in things like deal analysis, risk management, and uncovering biases. The move from the information age to the age of cognitive abundance is accelerating change, and for us, the holy grail will be automating all these things and adding layers of AI to every system and process.
And Copia is better positioned to help family offices take advantage of that?
Yeah, exactly. We were bullish on AI from day one, so the whole platform architecture was built with AI and security as dual priorities. Like I said, the tech keeps accelerating, and most family offices don't have the bandwidth to keep up. We can give them expertise without requiring them to build their own tech team, although I would argue all businesses are tech businesses at this point. We want to be the system of record for assets, in the same way that Salesforce is the system of record for contacts.
How do people learn more about Copia?
They should reach out! Anyone who is frustrated by how hard it is to manage wealth should schedule a demo with us or register for Copia Core, which will be a free version.
Other News
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- The York family, who own the San Francisco 49ers, are in the process of selling 6.2% of the NFL team at a valuation around $8.5 billion: 3.1% to the Khosla family, 2.1% to the Deeter family and 1% to William Griffith.
- The Anthony Pritzker Family Foundation donated $5 million to the University of Chicago Booth School of Business’s Family Office Initiative.
- Goldman Sachs Investment University has started enrolling financial professionals in its courses to help them build a foundational understanding and navigate private markets. (Attendees also get CE credits.)
- The Wall Street Journal is working to revive and expand its executive membership programs. Like all these things, they ain’t cheap; $25,000 per year.
- Gaming billionaire Escalante delivered an expletive-ridden rant to investors.
- Jason Wenk, the founder and CEO of Altruist, an RIA custodian that raised a $152 million Series F round of funding in April, was bored on vacation and began building a free AI tool that thousands of financial professionals might find useful. blueshirt.ai will help people navigate Nerd’s Eye View, the media company started by Michael Kitces, a financial advisor who is famous among his peers for his exhaustive blog posts (and for always donning a royal blue dress shirt).
- Emigrant Bank, which is owned and run by the Milstein family, has hired Mark Rogozinski to be its head of family office services. Rogozinski was previously the president of Cresset’s family office services group and the chief strategy officer at Pitcairn.
- Nervous about Trump and the state of America, more rich NYC parents are scouting elite U.K. schools.
- With the New York Liberty, Clara Wu Tsai Aims for the First $1 Billion Women’s Sports Franchise.
- 'I Loved That AI:' Judge Moved by AI-Generated Avatar of Man Killed in Road Rage Incident.
Jobs
- A global family office adding a U.S.-based investment arm in Palo Alto, California, is hiring an investment associate. This person can span asset classes, geographies, and fund structures. The job posting also says this person will have the opportunity to grow into a CIO role. “This is not just another associate role — it’s a chance to help shape a generational investment platform with global reach, unmatched access, and long-term vision.”
- A multi-billion-dollar alternative investment firm in the Bay Area is hiring an investment associate to serve existing family-office clients and pitch potential ones.
Miscellaneous
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- In New York City, meeting with friends and sources before they decamp to Long Island for the summer. (How is it almost June!?)
