What it is
Family office manager selection is the structured way a family office decides which outside managers, advisers or private fund sponsors to work with. A family office is a private team that helps manage the wealth and affairs of one family (a single-family office) or several families (a multi-family office).
Selection usually covers more than a manager's strategy. Families often look at the people, the investment process, operations, how risks are managed, how fees and expenses are described, and how well the manager's approach fits the family's goals and time horizon.
Some family offices are themselves registered investment advisers (RIAs) or exempt reporting advisers, and others are not. Either way, each family sets its own criteria, and those criteria often change as the family's needs change.
How it’s traditionally been approached
Traditionally, many family offices have relied on a written investment policy, an internal investment committee and outside consultants or counsel. The policy describes the family's objectives, tolerance for risk, need for access to cash and any values it wants reflected.
Evaluation commonly includes reading offering documents, interviewing the manager's team, checking references, reviewing the manager's background and regulatory history, and meeting with service providers such as auditors and administrators. This is often called due diligence.
Some families invest directly with managers. Others use funds of funds or secondary funds, which are vehicles that pool capital to access several managers or existing fund interests. Each route involves different layers of oversight, cost and complexity, and none is right for everyone.
How the right fund manager may help
The right independent fund manager may help a family organize its thinking. In a first conversation, a manager will generally explain their approach, how the private fund is structured, who is eligible to participate and what information is available. Any offering is made only by the issuer through its own offering documents.
Helpful questions to ask include: How does your team make decisions, and who is responsible for them? How are conflicts of interest handled? What are the fee and expense terms, and where are they written? How often will reports be provided, and what will they include? What happens if I need access to my capital sooner than planned?
It also helps to ask how the manager communicates when things go poorly, what the tax reporting looks like (for example, whether investors receive a K-1, and how that may affect timing of tax filings), and what the exit or wind-down process is. Your own licensed attorney, accountant and financial adviser can help you weigh the answers. Past performance does not guarantee future results.
The bigger picture
Choosing managers can carry real emotional weight. Money often reflects a family's history, values and hopes for the next generation, so decisions can bring pressure, disagreement or worry. Taking time, writing down shared goals and agreeing on a process can support peace of mind and reduce friction between family members.
Wellbeing and finances are connected. Many people find it helpful to build a team that includes professionals who take a whole-person view, and Providers.plus is one place to find such support. No single approach is right for every family, and thoughtful people choose differently.
Keep in mind
- Private fund investments are speculative and illiquid and can lose all of their value.
- Many private funds are open only to accredited investors under SEC Rule 501(a), and eligibility depends on the specific offering. Rule 506(b) offerings prohibit general solicitation. Rule 506(c) offerings allow it, but all purchasers must be accredited and the issuer must take reasonable steps to verify that status.
- Tax treatment, including any questions about K-1s or Qualified Small Business Stock (Section 1202), depends on individual circumstances, so consult your own licensed tax adviser.
- The Hastings Fund is an independent directory. It is not a broker-dealer, funding portal or investment adviser, and it does not recommend, endorse or rank any investment or manager. Nothing here is an offer to sell or a solicitation of an offer to buy any security.
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Create an investor account →Frequently asked questions
What is family office manager selection?
Family office manager selection is the process a family office uses to evaluate and choose outside fund managers or advisers. It usually involves reviewing a manager's people, process, risk controls, operations and fit with the family's goals. Each family sets its own standards.
How do family offices evaluate fund managers?
Family offices commonly use due diligence, which can include reading offering documents, interviewing the team, checking references and reviewing background and regulatory history. Many also rely on an investment committee and outside professionals. The exact steps vary from family to family.
Who counts as an accredited investor under Rule 501(a)?
Accredited investors are defined in SEC Rule 501(a) and include certain individuals who meet income or net worth tests in the rule, as well as holders in good standing of Series 7, 65 or 82 licenses. The August 2020 amendments also added knowledgeable employees of a private fund, spousal equivalents, and entities and family offices with over $5 million in investments or assets, along with RIAs and exempt reporting advisers. Eligibility depends on the specific offering, so confirm with your own counsel.
What is the difference between Rule 506(b) and Rule 506(c)?
Rule 506(b) offerings cannot use general solicitation. Rule 506(c) offerings may use general solicitation, but all purchasers must be accredited and the issuer must take reasonable steps to verify that status. Your attorney can explain how these rules apply.
Are funds of funds and secondaries part of manager selection?
Yes, they can be. Funds of funds pool capital to access multiple managers, and secondary funds buy existing interests in other funds. Each adds its own layers of fees, structure and oversight, so families often review them with the same care as any other private fund.
Are private fund investments risky?
Yes. Private fund investments are speculative and illiquid and can lose all of their value. Past performance does not guarantee future results, so consider your own circumstances and consult your licensed advisers before making any decision.
Educational resource. The Hastings Fund shares general information and connects people with independent fund managers. It is not professional advice. Talk with a qualified professional about your own situation.