The Fund of 1: An Innovative Investment Vehicle for Family Offices and Emerging Managers

As the world becomes more complex and interconnected, managing wealth has become increasingly challenging for families and their offices. But what if there was a way for family offices to take control of their investments and gain access to a wider range of opportunities? And what if emerging managers could leverage their expertise in managing family office capital to offer a unique investment strategy to a wider range of investors?

Introducing the Fund of 1 – an innovative investment vehicle that is revolutionizing the way family offices and emerging managers approach investment management.

What is the Fund of 1?

A Fund of 1 is a private investment vehicle created by a family office to manage its own capital. Unlike traditional funds, which pool capital from multiple investors, a Fund of 1 is an investment vehicle designed specifically for a single-family office. By creating a Fund of 1, a family office can gain access to a wide range of investment opportunities that may not be available to individual investors.

How does the Fund of 1 work?

The Fund of 1 is structured much like a traditional fund, with a management team responsible for making investment decisions on behalf of the family office. However, unlike a traditional fund, the Fund of 1 is not subject to the same regulatory requirements and reporting obligations. This allows the family office to be more flexible in its investment strategy and to take a longer-term view of its investments.

Benefits of the Fund of 1

One of the main benefits of the Fund of 1 is that it allows family offices to take more control over their investment strategy. By creating their own private investment vehicle, family offices can tailor their investments to their specific needs and risk tolerance. This can result in more consistent returns over the long term and a greater sense of control over their investments.

Another benefit of the Fund of 1 is that it can provide family offices with access to a wider range of investment opportunities. By pooling their capital into a single vehicle, family offices can invest in private equity, real estate, and other alternative assets that may be difficult to access as an individual investor.

Challenges of the Fund of 1

While the Fund of 1 offers many benefits, it is not without its challenges. One of the main challenges is the need to build a strong team with the expertise and experience to manage the fund effectively. Family offices may need to hire new staff or bring in external advisors to help manage the fund.

Another challenge of the Fund of 1 is the need to balance the desire for control with the need for diversification. By investing solely in the Fund of 1, family offices may be exposed to more concentrated risks. It is important to carefully consider the balance between control and diversification when designing a Fund of 1 strategy.

The opportunity for Emerging Managers

As the asset management industry continues to evolve, many emerging managers are looking for new ways to differentiate themselves and generate alpha for their clients. One promising area of opportunity is the productization of Fund of 1 strategy.

Productizing a Fund of 1

Productizing a Fund of 1 involves taking the investment strategy used by a family office and packaging it into a product that can be sold to external investors. This can allow emerging managers to leverage their expertise in managing family office capital and offer a unique investment strategy to a wider range of investors.

There are several advantages to productizing a Fund of 1 strategy. First, it allows emerging managers to differentiate themselves from their competitors by offering a unique investment strategy that is not available elsewhere.

Second, it can provide a stable source of capital for the emerging manager, as investors may be willing to commit capital to a strategy that has a track record of success in managing family office capital.

Conclusion

The productization of Fund of 1 strategies represents an exciting opportunity for emerging managers. By leveraging their expertise in managing family office capital, emerging managers can differentiate themselves from their competitors and offer a unique investment strategy to a wider range of investors. However, it is important to carefully consider the potential challenges and drawbacks of productizing a Fund of 1 strategy and to build a strong team with the expertise and experience to manage the strategy effectively.

The Fund of 1 is an innovative investment vehicle that can provide family offices with greater control over their investments and access to a wider range of investment opportunities.

While there are challenges associated with the Fund of 1, the potential benefits make it an attractive option for many family offices. As the investment landscape continues to evolve, it is likely that we will see more family offices exploring the Fund of 1 as a way to manage their wealth, and many more emerging managers providing hyper-personalisation across their pipelines to support their Limited Partners.

About the Author

Leesa Soulodre?is the General Partner of R3i Capital,?a global sustainable development venture capital fund?investing in climate change adaptation and the transition to value-based healthcare. Reach out if you would like to learn more about Funds of 1 and our mission in the?R3i Future Fund.

What’s in our name?

R3i stands for returns, resilience and reliability — three characteristics that are often used to describe or evaluate investments, businesses, or other assets.

Together, these three characteristics can be important factors to consider when evaluating the potential risks and rewards of an investment or asset.

3 i’s — “Intelligence, Innovation, and Insight” are the three characteristics that are often used to describe a venture firm’s edge. R3i synthesises these into its collective and inclusive “impact”.

Get involved in our film

Walk the Talk in our platform for Action

Accelerate Climate Action with the R3i Impact Foundation