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This week we speak to Alex Scott, Chairman of Schroders Global Family Office services, and founder of Sandaire family office. 

We discuss

• Alex’s journey of setting up and growing a multi-family office 
• Strategy not tactics in investing – be very clear on the difference 
• Focusing on a 5-year view in a world full of news about the last week 
• Decision making in small vs large groups, maintaining that strategic perspective on boards vs executive CIO level 
• Trends in investment markets: large institutions vs boutiques 

Investing: strategy not tactics

Family offices have a potentially very flexible, interesting and far-sighted mandate, they can pursue specific themes and enthusiasms. 

We are in the middle of an evolution in the investment world, the landscape has moved. The evolution of the ESG theme has brought something very different to families. We can talk about values and are able to enrich families’ connection with capital and conversations around it. Capital being multi-generational,  the next generation of owners are going to pass to millennials, and they have a very different approach to deploying capital which is very interesting for family office. Getting the engagement of the inheriting generation is critical. 

What was missing in the family office asset management space in 1990’s? An ability to put in place open architecture investment framework eg with multiple external managers, with independence and a focus on strategy. 

Being a small independent boutique becomes more challenging in idiosyncratic areas that require more resource and data. There’s a phase where small and independent has worked well but as markets have evolved, it’s becoming more challenging. 

What’s worked least well? 

• Areas where more idiosyncratic investing has gone well or badly 
• One issue with things at the margin of a portfolio is that they create a lot of heat and noise when they go wrong and require a lot of resource to sort out 
• Difference between a short term and a long term issue can be hard to discern in the heat and noise of market turmoil 

Decision making with a small group vs a large team

Individuals can sway larger groups in a particular direction – this always happens!  

Really good decision making has to come from committees who are really well balanced, explore issues, challenge but delegate to someone making the decision who’s performance can be assessed. 

Decision making can be occluded by too many individual opinions. 

Naturally, committees and boards get drawn more to exec level decision making, as that’s what’s tangible. Important for that group to get back to strategy not tactics, and what the world will be like in 3-5 years. So much gets written about yesterday’s noise and this can really influence. Long term strategy isn’t a great conversation piece! The committee challenge is to continually step back and say: “what does this mean for strategy”? what we read is all about short term and not long term. 

We all face the challenge of what does long term really mean. How long will performance deviations be acceptable? That tension is a critical challenge particularly for families but also any long term investor. 

Worries for next 12 months: fiscal experimentation and pandemic recovery. but really trying to discern what next 12 months means for the next 60 months or so. 

One thing for listeners to take away

Family offices have significant degrees of freedom to invest. The challenge will always to be strategic. Think strategically acknowledging that sometimes you have to be tactical.

Most under appreciated thing about investing  

There are very few careers where performance can be made so visible. 

Recommendations

• Simple But Not Easy by Richard Oldfield
• Bad Blood: Secrets and Lies in a Silicon Valley Startup  by John Carreyrou

• Billion Dollar Loser: The Epic Rise and Fall of WeWork by Reeves Wiedeman

• Sandaire 

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Each LCP investment uncut podcast is for information and marketing purposes only and does not constitute any form of investment or financial advice or a financial promotion (under the Financial Services and Markets Act 2000). All views expressed by the podcast hosts and guests are purely their own opinions and do not represent those of LCP, its clients or affiliates. Our podcast listeners should always seek independent financial or legal advice before making any financial or investment decisions. Please refer to the Legal Notices section on the LCP website for further information.​