Paul Carbone on the Evolution of the Family Office

Paul J. Carbone, co-founder and vice chairman of Pritzker Private Capital, has watched the family office industry grow in sophistication during his career. He describes the changes he has seen:

When I first got into this industry, family offices were seen as whimsical. They were seen as slower, patient capital — by the way, I hate the phrase ‘patient capital’ when it is associated with family investors as no one can really be patient with capital in today’s world. You can be flexible on your duration and approach, but you can’t be patient, in my opinion.

Over the years, the family office industry has evolved in material ways. Today’s markets are much more sophisticated about the advantages of family capital, with many providers beginning to recognize its true advantages. As for the companies seeking capital, they, too, are recognizing that all capital isn’t the same — that certain kinds of capital may fit their needs better than others. And then the intermediaries — the advisors, investment banks, and lawyers — are recognizing that there is a differentiated form of capital that may fit their clients’ needs better than others.

Historically, investment bankers had two columns for potential buyers of a company: the strategic buyers and traditional PE firms. Now there’s a third column of potential partners that has long-dated family capital and flexible capital to complement the other two columns. The family capital market has matured since I entered the space, with its advantages having become more defined and recognized in the marketplace.

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At the same time, within family offices and family investing groups, there is much more sophistication. They’ve attracted great talent, they’ve institutionalized family capital (but not in a negative way), and they’ve created disciplines, approaches, teams, tactics, and procedures that allow them to go toe to toe with anybody in the market.

What’s interesting to me is to look at the future. So few families have actually been able to implement this approach at scale. There are lots of family direct investors, but if you think about consistently and systematically deploying meaningful capital into a portfolio of companies, there are remarkably few. Even yet, family capital represents multiple trillions of dollars of capital. My bet is that we will see other larger families take up the challenge of family direct investing in the years to come.

About the Author

Margaret Steen

Margaret Steen is the editor of FO Pro, The Family Office Professional. Based in Silicon Valley, she has written for Family Business Magazine for more than 15 years.


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