Family Office Case Study

Our family office had grown into a multi-billion pound investment company. On top of the existing family businesses, we had four different investment teams running portfolios of equities, bonds, hedge funds, private equity and real estate - with significant exposure in each asset class.

We needed to formalise our corporate structure and ensure proper governance. We wanted to better understand and control the various investment books, while also increasing our profile with banks and brokers in order to gain flexibility and negotiate better business terms.

We wanted to work with someone who has specialist experienced in the four main asset classes, who understood both risk metrics and systems, at the same time as having relevant business and market experience. That's why we got in touch with Alpha Finance Advisors.

They used their Four Step Approach to understand and analyse our portfolios, then develop a strategy for capturing and measuring risk and reporting on an ongoing basis. Specifically, this involved:

  1. Defining our portfolio construction policy. They interviewed management and the portfolio managers to truly understand the investment processes and strategies deployed in the various books. Using their research they determined the overall objectives and targets for the main asset class 'buckets', then captured the various strategies deployed within each bucket. They looked at our approach to value and risk, and the different sub-strategies implemented to achieve those targets.
  2. Designing the reports. Next they defined how to capture and measure risk in the portfolios and how to report on them (i.e. what risks were relevant, or shouldn't be there, and the best measures, metrics and indicators to use). They took into account the specificities of the main asset portfolios, as well as the sub-strategies. They planned a data structure that would allow us to measure and report risk on a consolidated basis as well as reconstructing the various strategies as required. Specific reports were designed based on the expectations and needs of our intended recipients.
  3. Selecting and deploying the reporting infrastructure. They reviewed various ‘off the shelf’ software to identify the best architecture for generating our reports. Taking into account the existing structure and tools we used, they incorporated these into the final solution. Other considerations included the importance of our hedge fund portfolio and cost.
  4. Monitoring and review (full outsource arrangement). After they deployed the reporting infrastructure we elected to hire Alpha Finance Advisors as our outsourced Risk Manager to run our reports on an ongoing basis. They not only provide detailed reports but comment on them for the benefit of our CEO and of the Chairman of the Board. They also prepare reviews and presentations for banks and third parties on an ad-hoc basis.

Alpha Finance Advisors have helped us to develop a set of documentation that sets out the objectives, guidelines and limits of our global book, each asset portfolio and the sub-strategies. They've developed reports for each stakeholder according to their requirements and deployed the infrastructure to deliver those reports.

Understanding the importance of our hedge fund strategy, they have also organised a specific monthly Hedge Fund Committee meeting to ensure better communication, control and understanding. For the same purpose they have implemented a bi-annual full “Turnbul” risk review for the Board, which encompasses all aspects of our business (i.e. operations, finance, legal, HR, IT). This has been a huge step forward in our corporate governance.

We have benefited from Alpha Finance Advisor's wealth of market experience. As an external third party they provide independence and a different perspective to what we were previously doing. It is also reassuring to the various recipients of our reports that our analysis is now clear, concise and unbiased.

Case studies - Family Offices

"We have benefited from Alpha Finance Advisor's wealth of market experience. Using an independent third party is also reassuring to the various recipients of our reports that our analysis is clear, concise and unbiased."