How to set up an investment fund for a family office

Authored by FlexFunds
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The investment fund of a family office seeks wealth preservation.

Typically, large family fortunes are managed by a family office in a professional and sophisticated way to maintain as much purchasing power as possible. In addition, to optimize the family’s financial strategies, the aim is to set up an investment fund that meets the family’s needs.

What does a family office do?

A family office is a company created exclusively to manage large family fortunes.

When a family’s wealth is small and within the average, it is usually managed by a financial advisor or even a knowledgeable family member to maintain it over time.

However, when the numbers are vast, knowledge, experience and time commitment are required, so the help of a family office is needed.

The difference between a family office and an ordinary wealth management firm is that the latter does not have legal and tax advice as a family office does.

Types of family offices

While all family offices focus on financial management, there are two types in particular:

  • Single-family office: as the name suggests, these family offices were created to manage the wealth of a single-family.
  • Multi-family office: on the other hand, multi-family offices oversee managing the money of several groups, so they have larger work teams and more significant amounts of money.

How family offices invest

According to a Goldman Sachs report conducted in 2021, 80% of family offices surveyed focus on capital appreciation to transfer their wealth to the next generations.

In addition, family offices are looking for assets that have high appreciation potential, despite having higher volatility, as they have very long-term investment horizons.

“We found that, in general terms, family offices tend to be more aggressive in the search for higher returns, but they are also more oriented to the long term, given their lack of investment time horizons and the absence of external interferences,” says the report of the before mentioned investment bank.

According to the study, on average, family office portfolios are mainly composed of publicly-traded stocks (31%), cash and bonds (19%), and alternative investments (45%), including private equity (24%), real estate (11%), hedge funds (6%) and private credit (4%).

How to create an invesment fund for a family office

Not all family office managers or advisors have the tools, time, and knowledge to develop an investment fund. Therefore, many of these organizations rely on investment vehicle structures such as FlexFunds.

At FlexFunds, we have a repackaging or asset securitization program to develop exchange-traded products (ETPs) that allow family office managers to put together investment strategies practically and efficiently.

For a family office to structure an investment funds through a FlexFunds’ ETP, a series of four simple steps need only be followed:

Step 1: initial consultation.

First of all, it is advisable to schedule a meeting so that we can analyze the specific situation and provide a customized solution according to the objectives and needs.

Step 2: ETP design

Secondly, the portfolio manager defines the strategy and its terms and conditions. At FlexFunds, we ensure that the ETP is structured according to the highest quality standards in the industry so that it is an efficient investment vehicle for investors.

Step 3: Onboarding process

After defining the plan, the engagement letter (or service contract) is formalized, and the onboarding process of the portfolio manager and the underlying company in question begins.

Step 4: listing and issuance

When the prospectus or memorandum is ready and reviewed by all the providers involved in the structure, the ETP is issued, generating an ISIN/CUSIP code that facilitates its subscription and access from brokerage accounts in international private banking.

Thus, thanks to FlexFunds’ solutions, you can access investment vehicles that securitize multiple asset classes, both plain vanilla ones, and alternative, for your family office.

In addition, FlexFunds is backed by top-tier companies, including Bank of New York Mellon, Intertrust, and Apex, the prestigious financial solutions provider.

To learn more about our ETPs, a solution that can be a fit for family offices, do not hesitate to visit our website where you will find all the necessary information.

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FlexDual Portfolio Details

Dual Custody: Securitizes a strategy with listed assets in a Bank of New York Mellon & Interactive Brokers accounts

Applications

  • Bankability: Global distribution of a strategy
  • Centralized managed account
  • Fund creation alternative
  • Custody of locally listed bonds
  • Design a mixed investment strategy of fixed income, equities, and derivatives

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  • No limitations on rebalancing or portfolio composition
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FlexRegulated Portfolio Details

Securitizes a strategy with listed assets in an Interactive Brokers account targeting institutional and retail investors

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Regulated fund creation alternative

Advantages

  • Trading and custody platform with available leverage
  • European UCITs compliant
  • Market to institutional and retail investors
  • Actively managed by a Portfolio Manager
  • Market maker as part of the solution
  • Low value tickets
  • Cost efficient

FlexOpen Portfolio Details

Securitizes a strategy with listed assets in any custodian account

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Regulated fund creation alternative

Advantages

  • Manage portfolios from any major custodian
  • Introducing Broker Dealers maximize revenue from own trading fees structure
  • AUM remain on the introducer broker agreement
  • Efficient subscription through Euroclear
  • Actively managed by the Portfolio Manager
  • No limitations on rebalancing or portfolio composition
  • Cost efficient

FlexPortfolio Details

Securitizes a strategy with listed assets in a Bank of New York Mellon or Interactive Broker custodian account

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Fund creation alternative
  • Custody of locally listed bonds

Advantages

  • Efficient subscription through Euroclear
  • Actively managed by a Portfolio Manager
  • No limitations on rebalancing or portfolio composition
  • Cost efficient
  • Flexibility in the choice of executing broker for underlying trades
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Welcome to FlexFunds

We provide our services under the Global Note Programs through several entities that perform different activities. Among these entities are FlexFunds ETP LLC which acts as Calculation Agent, and FlexFunds Ltd, which acts as the Program Coordinator. Before making a decision to invest in the Global Note Programs, you should consider the following:

  1. Independent entities. FlexFunds ETP and FlexFunds Ltd. are not managers of the special purpose vehicles, collectively, responsible for the issuance of Notes under the Global Note Programs.
  2. Coordinated Activities. FlexFunds ETP and FlexFunds Ltd act as coordinators of the different entities participating in the Global Note Programs. However, each of the entities is responsible for its own duties and activities in the process.
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