Focus On... Private Investing

From navigating market cycles with alternative investments to enhancing trust through transparent fee structures—and becoming the partner of choice for leading alternative managers—they offer deep insight into how MFOs can drive long-term value for the families they serve.

Enhancing Portfolio Duration with Private Equity

Duration can be an enduring advantage for certain investors, and multi-family office clients are well positioned to benefit from it through the flexibility their long-term orientation provides. By embracing illiquid asset classes such as private equity, MFOs help families capitalize on the myriad benefits of duration and unlock long-term opportunities.

As Lane explained, “Through the multi-family office construct, I think you can really leverage that duration advantage. Many single-family offices do not have that capability, but I believe you eliminate some of the personal bias and emotional aspects that come with single-family offices, and certainly some of the legacy challenges that exist in endowments. Multi-family offices, I believe, are well positioned to execute on that, leveraging duration to their advantage.”^[1]

Scale enhances this advantage. By aggregating capital across multiple families, MFOs can hire highly specialized and experienced teams dedicated solely to sourcing, diligencing, and monitoring leading managers. At SCS, for example, ten professionals are dedicated exclusively to these efforts, combining both depth and breadth of expertise.

An extensive network of relationships with General Partners (GPs), Limited Partners (LPs), Sovereign Wealth Funds (SWFs), and Single-Family Offices (SFOs) further differentiates MFOs in building and maintaining private equity portfolios. Very few SFOs have the scale of a MFO, which enables MFOs to become important and meaningful investors and relationships for GPs. This not only facilitates access to leading managers but can also provide better information, co-investment opportunities, stronger partnerships, and more.

Navigating Market Cycles

Private equity can also provide portfolios with a measure of insulation during periods of market volatility. As Lane noted, “These investments are marked on a quarterly basis. There are a couple of benefits to that. Number one, it eliminates some of the emotion from decision-making. With those marks on a quarterly basis, there’s not seemingly as much volatility in those portfolios. It helps prevent people from making irrational, immediate, or emotional decisions.”

The long-term nature of private equity holding periods also allows for potential outperformance over significant periods of time and through a variety of cycles and market environments. Historically, private equity has tended to outperform public equity.

“Through market cycles—whether it was the 1999-2000 dot-com bubble, the global financial crisis, or COVID—private equity has generally outperformed public equities over any meaningful period of time, meaning a ten-year cycle,” shared Lane. “That is where you end up having the benefit to think longer-term and execute during periods of turmoil, playing the long game to generate performance.”

Differentiated Returns Through Alternatives

Building on the advantages of long-term duration and scale, MFOs also pursue alternative investments to enhance overall portfolio performance. Lane noted that public equities and fixed income now offer very little variation in performance, making it difficult for investors to generate meaningful alpha.

“Those markets have become very efficient, so they are not areas where you are likely to find or pursue a lot of alpha opportunities,” said Lane. “Where there is dispersion, and where there is meaningful alpha, is on the alternatives side, and particularly the privates side.”

He continued, “That is where we encourage our clients and where I have always, throughout my career, leaned in to find that alpha and outperformance in markets like private equity, natural resources, and real estate. The whole objective in using alternatives and reaching into privates is to outperform net of fees, net of carry, and net of taxes over long periods of time. That compounding is really powerful and can only be captured completely when you include alternatives, specifically privates.”

With longer holding periods and a tolerance for illiquidity, MFO clients are well positioned to generate attractive risk-adjusted, tax-efficient returns over long time horizons, providing opportunities to complement traditional 60/40 or 70/30 portfolios.

Alignment and Transparency

Trust and alignment are central to building long-term partnerships with families. Alice described how SCS’ fee model reinforces both.

“Our fee structure is aligned and has to be aligned with our clients’ interests,” said Alice. “We do well when they do well. Transparency and simplicity are paramount when building trust with families.”

For some families, incorporating illiquidity into a portfolio can be a significant shift. Therefore, noted Alice, “it’s even more important that they understand and have clarity that our recommendations and our advice are truly in their best interest.”

Eliminating that uncertainty allows SCS and its clients to focus on what matters most: understanding each family member’s needs and representing the family’s long-term objectives, including their goals, values, and interests.

Acting as A Long-Term Partner of Choice

Relationships with General Partners (GPs) can be a source of significant value when supported by scale and experience. As Lane explained, building those relationships takes more than capital: “Anyone can be an investor, all you need is money. The challenge is if you want to be a great investor, it takes so much more than that.”

It takes years of hard work to stand out in the market and build strong, differentiated relationships with GPs. But once an investor has built a reputation, it becomes a real asset in optimizing relationships with existing GPs and positioning the investor as a first call for new and emerging GPs.

“That’s critical for what we look for in managers and what we try to bring from an allocator perspective,” said Lane. “Scale is incredibly important so that you can optimize the relationship with the GP, write a meaningful enough check to be the first call on co-investments, be the early call in terms of access to information, and serve on the limited partner advisory committee. The key is having enough scale to matter, but not so much that you cannot do the really interesting, nimble, niche things.”

Deep experience is also essential to becoming a truly great investor, requiring time, expertise, and exposure across multiple market cycles. With a dedicated team of ten professionals focused solely on private equity, SCS has built the knowledge and judgment required to form deep, differentiated relationships with leading GPs. “It’s not just about being an investor, it’s about being a value-add investor,” said Lane. “When you ask a general partner, who are your best LPs? We want to be their best LP.”

For many years, Sequoia Capital was viewed as one of the best venture firms in the world, often receiving the first or last call from talented entrepreneurs as they had proven themselves to be great partners in building many of the leading tech companies in the United States. With the ability to back both emerging and proven winners across all sectors of private equity—venture, growth equity, and buyouts—SCS is now in a similar position to receive first and last calls from talented GPs.

Advancing Families’ Access to Private Markets

As Lane shared, private investing isn’t just an asset class: it’s a long-term strategy that multi-family offices are well positioned to lead. At SCS Financial, Focus Partners Family Office, the team helps families access sophisticated private market opportunities through a platform built on trust, alignment, and enduring partnerships that support families across generations.

Learn more about SCS Financial, Focus Partners Family Office, at scsfinancial.com.

The views expressed are those of the participants at the time of publication and are subject to change without notice. The information presented is for general educational and informational purposes only and does not constitute and should not be considered tax, accounting, investment or legal advice. This publication has certain forward-looking statements that reflect the participants’ current views with respect to certain current and future events. These forward-looking statements are, and will be, subject to many risks and uncertainties, which may cause future events to be materially different from these forward-looking statements or anything implied therein. Any forward-looking statements in this publication are based upon information available to the participants on the date hereof. Neither Focus, SCS, nor the participants undertakes to update or revise any forward-looking statements contained in this publication even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. 

[1] Disclaimer: The quotes in this blog have been edited for clarification and brevity. Any alterations made do not change the intended meaning of the original statements.