Most recently Leon Cooperman, decided to close down his hedge fund, Omega Advisors, Inc and start a family office. Steven Cohen of SAC Capital Advisors also converted his hedge fund to a family office. The primary reason that Leon stated was because he didn’t want to spend the rest of his life “chasing the S&P 500 and generating returns on investor capital”, however many hedge fund owners are also giving money back to their investors and starting family offices for a number of other reasons.
Regulatory considerations, succession planning, investor pressures and operational costs are all factors that are motivating hedge fund owners to return the outside capital and adopt a family office to manage their own funds. Regulation and compliance can take up a significant amount of money for operating expenses at a hedge fund and those costs continue to increase. Regulation can also make it challenging for them to move into other asset classes and investment styles.
The 2/20 model for hedge funds is outdated and not working, so another reason for moving to a family office is that you don’t have to deal with outside investors and you can get 100% of the returns.
Typically we find that in order to start a family office, the net worth of the family should be at least $100MM and closer to a $1 billion for it to be worth it.
For additional information on how to convert from a hedge fund to a family office, please contact: Michael Rosenblatt, President of FON Search and The Quest Organization at: 212-971-0033 or via email at michael.rosenblatt@questorg.com
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