I spent a week in New York at a series of discussions and roundtables with emerging fund managers, seasoned family offices, and long-term allocators.
A family office is a private firm that manages the wealth of a single ultra-high-net-worth family (or a small group of families), handling investments, taxes, estate planning, and risk.
The Biggest Insight: Trust the Manager, Understand the Plan
Family offices invest in managers they can know and question. That face-to-face relationship builds trust and improves decision-making on both sides. It’s not just a handshake—it’s a shared understanding of “what we own, why we own it, and how we’ll behave under stress.”
- They accept drawdowns—but only the ones they understand.
- They prioritize capital preservation over maximizing gains.
- They “play to stay rich,” not to get rich.
Drawdown is the temporary decline from a peak to a subsequent low before a recovery. The key is magnitude (how deep) and duration (how long).
What you can apply:
- Demand a clear, written playbook from any strategy you follow: what to buy, when to buy, and how losses are managed.
- Focus on process indicators you can track (position sizing, hedging triggers, risk limits), not just performance snapshots.
AI Investing: The Core Growth Engine (Public and Private)
Across sessions, one theme dominated: artificial intelligence. Sophisticated allocators are heavily exposed to AI-linked opportunities in both public markets (listed equities, ETFs) and private markets (venture, growth equity, secondary stakes).
Why they’re leaning in:
- AI is reshaping productivity and profit pools across industries.
- In a world where traditional growth is uneven, AI becomes the margin of outperformance.
- The ecosystem is layered—semiconductors, infrastructure, software platforms, applications, and automation/robotics—with multiple on-ramps for exposure.
How they structure it:
- Core public exposure to leading, profitable platforms and enablers.
- Selective private allocations for differentiated upside and earlier entry.
- Position sizing that respects volatility while still moving the needle.
What you can apply:
- Build a stacked exposure: a diversified core of AI leaders in public markets, plus selective satellites (ETFs or thematics).
- Avoid over-concentration in one sub-sector. Leaders rotate between chips, cloud, and app layers.
- Track fundamentals (revenue growth, margins) and momentum (relative strength) to confirm leadership.
Hedging with Options: Offense Needs Defense
Family offices are comfortable with options as risk tools, not gambling chips. The goal is drawdown control so they can stay invested through cycles.
A hedge is like portfolio insurance—positions (often options) designed to offset part of the loss when markets fall.
Common approaches mentioned:
- Index puts to limit tail risk.
- Collars (own stock + sell call + buy put) to reduce downside at the cost of capped upside.
- Volatility overlays that increase protection when stress indicators rise.
Why this matters:
- Hedging can shorten and shallow drawdowns, reducing the odds of panic selling.
- It allows higher exposure to high-potential assets (like AI leaders) with a defined risk budget.
What you can apply:
- If you own concentrated equity exposure, learn the basics of protective puts and collars.
- Treat hedges as a line item—a known cost for smoother compounding, not a failed trade.
Gold and Bitcoin: Preservation First, Upside Second
Gold remains a default allocation for large, multi-generational portfolios. It’s liquid, globally recognized, and historically useful during currency debasement or macro shocks.
Bitcoin is increasingly viewed as “digital gold.” Most family offices still keep modest allocations, but the direction of travel is upward as infrastructure, custody, and regulation improve.
Currency debasement means the money supply grows faster than real economic output, which can erode purchasing power over time.
What you can apply:
- Consider a core preservation sleeve: gold (or gold miners/ETFs) and Bitcoin at sizes that won’t disrupt your plan.
- Rebalance periodically. Volatility can quickly change weights.
- Maintain secure custody and understand tax treatment in your jurisdiction.
Altcoins and the Learning Curve
Outside Bitcoin, altcoin allocations among family offices are limited and highly selective. That said, interest is rising, driven by:
- Curiosity about the next platforms (infrastructure, scaling, on-chain finance, data).
- Exposure to OGs—early crypto investors—who share hard-earned perspective on cycles, custody, and risk.
The consensus isn’t “go all in”; it’s “learn first, size later.” Many are building knowledge pipelines (specialist managers, research partners) to upgrade understanding before committing meaningful capital.
What you can apply:
- If exploring altcoins, set a strict cap (e.g., a single-digit % of portfolio).
- Use a thesis-driven filter (clear utility, real traction, credible team) and exit rules.
- Expect higher volatility and liquidity risk; size accordingly.
How Elite Allocators Think About Risk (A Simple Framework)
1) Survival > heroics
The first rule is don’t blow up. This mindset enables time in the market, which is how compounding works.
2) Process > predictions
They prefer repeatable rules—position sizing, hedging playbooks, stop-loss disciplines—over point forecasts.
3) Narrative + numbers
They want a clean narrative (why this will win) backed by measurable data (revenues, margins, market share, momentum).
4) Scenarios over certainties
They map what could go right/wrong, then pre-decide how to respond. That reduces emotional decisions in real time.
5) Liquidity matters
They care about how fast you can adjust. In stress, liquidity dries up—plans should reflect that.
Translating the Takeaways Into Your Allocation
Below is a straightforward, plain-English starting template. Adjust to your goals, risk tolerance, and time horizon.
1) Core Growth: AI-Linked Equities
- What: A diversified basket of AI enablers and beneficiaries (semiconductors, cloud, software, automation/robotics).
- Why: Structural growth driver with multiple sub-sectors.
- How: Blend broad market exposure with targeted AI ETFs or a curated list of leaders.
2) Risk Control: Hedging
- What: Index puts, collars, or volatility overlays sized to your drawdown tolerance.
- Why: Keeps you invested by limiting worst-case outcomes.
- How: Treat it as a budgeted cost for smoother compounding.
3) Preservation Sleeve: Gold + Bitcoin
- What: Gold (or miners/ETFs) and Bitcoin at modest weights.
- Why: Diversification and potential protection against currency debasement.
- How: Rebalance annually; secure custody for Bitcoin.
4) Optional Satellite: Altcoins (Advanced)
- What: Select, thesis-driven projects.
- Why: Asymmetric upside, but much higher risk.
- How: Small sizing, strict risk rules, and ongoing research.
Manager Selection: Questions a Family Office Would Ask
Use these prompts to evaluate any strategy—or to self-audit your own approach.
- Edge clarity: What is your edge, and why will it persist?
- Risk definition: What’s the expected max drawdown under stress, and how will you manage it?
- Hedging plan: When do hedges turn on/off, and who executes them?
- Capacity & liquidity: How does strategy performance change as assets scale?
- Evidence: What data shows the process works outside the backtest?
- Communication: How often and how clearly do you share what changed and why?
Quick Glossary (for fast reference)
- Momentum: A tendency for recent winners to keep outperforming for a period, often due to persistent institutional buying.
- Hedge (options): Buying protection—like puts—to offset losses during downturns.
- Collar: Owning a stock, selling a call (caps upside), and buying a put (limits downside).
- Store of value: An asset meant to preserve purchasing power over time (e.g., gold, Bitcoin).
- Private markets: Investments in companies not listed on public exchanges (venture, growth equity, PE).
Final Thoughts
The families I met in New York are not optimizing for bragging rights. They are optimizing for resilience—so they can stay on offense when opportunity appears.
Take the same approach:
- Define your rules before the storm.
- Lean into structural winners like AI with position sizing that respects risk.
- Budget for hedges so you can keep compounding.
- Own a preservation sleeve (gold/Bitcoin) at rational sizes.
- Treat altcoins as advanced satellites, not core holdings.
How are you allocating today—and what will you change after seeing how the most durable capital allocates?
Disclaimer: This article is for informational and educational purposes only. It does not constitute financial, investment, or legal advice, and should not be taken as a recommendation to buy, sell, or hold any asset. Always conduct your own research and consult with a qualified professional before making any financial decisions. The author and publisher are not responsible for any actions taken based on the information provided in this content.
