The Evolving Family Office Portfolio

How to align your investment philosophy with your talent management strategy for organizational success

March 31, 2025 —

As the family office ecosystem continues to mature in terms of sophistication, innovation, and public orientation, so too does the respective investment portfolio which is increasingly diversified in a bid to achieve greater control, alignment with family values, and returns.

Enterprising families are shifting away from traditional allocations and investing in alternative asset classes in large numbers. In this article, we explore what human capital this change demands and how alignment with investment, compensation and incentive structures, as well as communication and management philosophies, will dictate their success.

Outperforming the markets

As reported by JP Morgan, approximately 46% of investible capital is being allocated to private equity, venture capital, hedge funds, and private credit today versus 26% in public equities, signifying a marked increase in risk appetite amongst family office leaders.

In fact, according to the PitchBook North American Private Equity Index, private equity has consistently outperformed the S&P 500 over the past 5-, 10-, 15-, and 20-year periods. Meanwhile, on an after-tax and after-fee basis, public equities have been challenged by extended periods of low interest rates. As family offices seek greater returns, principals are capitalizing on alternative asset classes and diversifying their portfolios to increase alpha. This requires not just comfortability with greater risk but a level of sophistication once reserved for institutional investors.

Family offices are becoming extremely robust in their investment strategies and structures which now typically include formal Investment Committees (often with external investment professionals), comprehensive Investment Policy Statements, aligned investment philosophies, ROI targets based on industry metrics, and benchmarks against which to measure success. These offices also require exceptional investment teams that can unlock access to the most lucrative opportunities, perform due diligence, and manage investments in a way that aligns with the long-term values and objectives of the family. These teams must also consider the potential tax, reputation, and social impact each investment might make on other facets of the enterprise.

The decision tree

The increased allocation to alternative investments has fueled a debate over employing a specialist versus generalist skillset in-house. It has also sparked a more fundamental conversation about the benefits of an in-house investment professional as opposed to leveraging an outsourced chief investment officer (OCIO) model. While many families successfully adopt a hybrid structure, the decision tree within family offices today often boils down to cost, networks, and control.

While the OCIO model may work well for smaller enterprises, family offices value autonomy and need each investment to consider the entire family enterprise ecosystem. Principals increasingly influenced by the next generation have the desire to know exactly how and where their capital is allocated and most believe this is best achieved with an in-house CIO.

Aligned philosophies

We often highlight the need for culture fit in the conversation about family office executive search. Though family office professionals must have the expertise and experience needed to effectively execute an investment strategy, both the candidate and the family need to evaluate how their philosophies, values, and expectations align in all areas, including investment and management style, risk appetite, communication and decision making style, and compensation. An investment professional from a fast-paced, high-risk environment may not be a fit with a more traditional platform focused on wealth preservation. A professional accustomed to working with autonomy may get frustrated with an environment characterized by micromanagement, and in turn, those that require direction may not succeed in a structure that expects initiative. The same analysis is required when looking at compensation structures and expectations to ensure alignment in incentivizing long-term performance and encouraging decisions consistent with total family wealth objectives.

In our review of numerous chief investment officers that we have placed within single family offices, it is evident that while they shared commonalities in their investment experience, it would be impossible to interchange any one of them as their values and philosophies, both from an investment and compensation perspective, were uniquely aligned to the respective families they serve.

In our experience, a successful candidate must not only have the requisite experience and qualifications for the position, but also perfectly align with the values, philosophy and culture of the family and family office.

Recruiting, retention, and succession strategies are fundamental to the success of every family office, and building a culture that will continue to attract and retain is its lifeblood.