PWM: Building an effective investment engine for the family office
As alternative investments fast become the key competence at family offices, structure remains vital, helping facilitate liquidity management, co-investment and direct deals
A family office may have capital, ambition and talent — but without structure, these elements rarely produce excellence.
The real differentiator lies in how the investment function is built: how people, process and governance combine to turn ideas into disciplined decisions.
But the secret lies in starting with purpose, not structure. Too many offices begin with organisational charts before asking the most fundamental question: what are we trying to achieve? Is the goal to preserve wealth, compound it or build something new? To support philanthropy or entrepreneurial ventures?
The investment structure should flow from that purpose — not the other way around. Without clarity, families risk overbuilding (creating unnecessary complexity), underbuilding (leaving the CIO without tools or support) or overdiversifying (spreading capital thinly across ideas with little coherence).
When designing the model, once purpose is clear, resourcing decisions follow. Which capabilities belong inside, which outside and which should be avoided altogether? Hybrid models are now the norm — lean internal teams orchestrating a curated network of external specialists.
Responsibilities must be explicit, information flow seamless and accountability visible. As one family office leader put it: “Be clear early: are you spending 50 or 75 basis points? Build accordingly. Breadth without depth is an expensive way to get mediocre results.”
We cannot hide from the maxim that technology boosts productivity. Modern investment functions run on data. Without robust systems, it becomes impossible to see the whole picture or learn from past decisions.
But technology is not about owning every new tool; it is about enabling clarity, speed and institutional memory. Cyber security is now a fiduciary duty. Protecting capital means protecting data, identity and continuity.
Agility versus anarchy
Governance is the new guardrail between agility and anarchy, but it must fit the purpose. Too little, and decisions are dominated by personality; too much, and process strangles momentum.
Effective governance is proportionate, not performative. It defines how ideas move from origin to approval, clarifies who decides and ensures accountability without stifling initiative.
Liquidity management deserves special attention, as illiquid commitments can quietly erode flexibility. Best practice includes rolling liquidity forecasts and minimum thresholds to safeguard responsiveness.
“Effective governance is proportionate, not performative. It defines how ideas move from origin to approval, clarifies who decides and ensures accountability without stifling initiative”
Families pursuing multiple objectives — financial, philanthropic, strategic businesses — should integrate them under one capital allocation process to avoid fragmentation.
Direct investing promises control and engagement, but the capabilities required differ from those needed for public markets. The most effective offices build gradually: funds first, then co-investments, then direct deals.
Relationships matter as much as capital. Access depends on trust and reputation. Separating the management teams responsible for direct holdings and financial assets often makes sense, given the different skills and networks required.
The bottom line is that an effective investment engine is neither the biggest nor the most complex. It is the one that makes disciplined, informed decisions easy to reach — and poor decisions hard to make. It begins with purpose, is powered by clarity and governed by proportion.
Sally Tennant, founder of Acorn Capital Advisers and formerly CEO of Kleinwort Benson, Lombard Odier (UK) and Schroders Private Banking
This article was published in Professional Wealth Management