Alternative Access - January 2020

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WEALTHY FAMI L I ES US ING 600-YEAR- OLD PLAN TO D I SRUPT PE

By Elis Baufis, Featured on Forbes.com

Pritzker Private Capital recently gathered family office investors in Aspen, Colorado, to look at how wealthy families are upping their game to compete for quality deal flow in a hot private equity market. The conference highlights a growing trend among wealthy families to establish hybrid private equity (PE) vehicles that raise third-party capital in order to match the breadth and sophistication of traditional private equity firms, while still leveraging the connections and other competitive strengths typical of family investors. New Strategy, Old Roots The movement by wealthy families to make direct investments in companies is a reprisal of a 600-year-old practice that started with “the Medicis and other grand families of Europe,” according to John Rompon, a family office private investor and managing partner of Marjo Investments, LLC. “After the Great Recession, wealthy families began to make direct investments at a quicker pace,” he says, adding that only about 15% of family investors “have demonstrated the ability to consistently make and manage large investments professionally. According to Mr. Rompon, the arrangement provides necessary capital for lead families to use less debt, acquire larger companies, retain companies over longer periods, and hire top-tier investment teams. “Even billionaires start to run out of money if they continue to buy companies but less frequently sell them,” he says.

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