Episode 70: Rethinking the Family CIO Role for the Modern Family Enterprise

All right.

Thanks so much, Adam.

The interesting thing I find is that the hard truth is that many families, it seems to me, are really fighting the last war.

For 20 years, the playbook was get into top tier private equity, embrace illiquidity, and harvest the premium.

But But today, we're looking at what I think is a PE market that's very saturated.

We're seeing compressed premiums that don't actually compensate for the risk of being locked up.

And many families are finding themselves asset-rich but cash-poor.

So there's a number of things going on here with the CIO, including the fact that valuation integrity is starting to be questioned.

There's now a system where managers are setting their own prices and auditors are being hired by those managers.

And crucially, the CIO's incentives are often tied to those very numbers.

So it's a circular logic that really masks reality.

So that's my question for Christian and Hans Christian.

You know, what can we do to kind of combat this? And is the role of a CIO changing?

Okay, thanks very much, Jane.

I think it's important to pinpoint what we're exactly looking at.

we are often asked to help with the setting up and development of single family offices and with the placement of the position of the person in charge of leading a single family office that is very rarely been called in our experience really a cio in that sense because the task is broader It's really the person who is in charge of stewardship for the portfolio, whichever it is, and they can be very different, obviously, and who is the bridge between the family and its portfolio and its wealth.

And it's mostly about strategy and then about with which detailed asset allocations and strategies the fortune is being managed.

So there's obviously changing environments, but the most important thing is that the family really makes clear what they expect for the future and that the person who is in charge of implementing that is hired accordingly and incentivized and measured accordingly.

And this cannot be by short-term performance measures.

Okay.

That's a good start.

Let's go deeper on the incentive structures.

Jane was talking about the models and how there are alignments or misalignments for behavior within the CIO model.

Obviously, that's much more complex with private assets.

So, Jane, let's talk a bit about the governance structures that can challenge and manage these incentives and what can be put in place.