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SFOs planning to Increase AI allocations, says report

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Nearly 90 per cent of single family offices (SFO) are planning to place additional money in hedge funds this year, according to a new report published by The Rothstein Kass Family Office Group, a division of global professional services firm Rothstein Kass.

According to the results of a survey of 151 executive directors at single family office operations carried out during the first quarter of 2011, the most popular strategies are long / short equity (53 per cent), distressed (49 per cent), arbitrage (33 per cent), managed futures (25 per cent), and global macro (25 per cent).

"Raising Capital from Single-Family Offices – Considerations for Financial Firms," which was co-authored by Forbes Insights and private wealth expert Russ Alan Prince, also states that almost 70 percent of survey participants plan to increase allocations to the private equity sector in 2011. Investment preferences are likely to include established companies (59 per cent), mezzanine financing (39 per cent) and second-round financing (32 per cent).

Approximately 85 percent of single-family offices surveyed currently invest in hedge funds, with roughly half reporting active private equity sector investments.

Mean investable assets of single-family offices stands at roughly USD416 million in 2011, up from approximately USD236 million reported in 2010.

Nearly all single-family offices rely on external investment management professionals, with roughly 22 perc ent also indicating internal investment management capacity.

"One of the greatest challenges in understanding the single-family office sector arises in defining its scope. Surging interest in the space has compelled a variety of wealth management firms to market themselves as family office providers, contributing to widely disparate notions of what these structures encompass," says Flynn. "Our latest report illustrates the range of services typically offered by a typical single-family office entity. Among shared characteristics, the most successful ventures recognised that the Executive Director is critical to cohesive management.

"Though the title can vary, the Executive Director often serves as a quarterback for the wealth management team. More frequently, this individual is exerting greater influence regarding investment decisions and due diligence processes. As a result, investment managers seeking to raise capital from the single-family office community are best-served by adopting a consultative approach – one that consider investment orientation alongside long-term objectives to gain insight into the ‘professional ecosystem’ at work."

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