MUMBAI: Multi-family office and advisory firm Waterfield Advisors is raising a $100 million fund of funds (FoF) from Indian family offices, which will back successful homegrown private equity and venture capital funds.
A FoF is a pooled fund which invests capital in other funds, allowing its investors diversified access to fund managers, instead of directly investing in individual funds and managing them. While FoFs are major investors in alternative investment funds such as PE, VC, credit and infrastructure globally, in India, there are hardly such structures available for HNIs and family offices.
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Waterfield has come up with the FoF plan to help Indian family offices with better access to Indian fund managers, said Soumya Rajan, founder and CEO, Waterfield Advisors.
“Family offices typically tend to support one fund or two funds and they make smaller allocations. And because they make smaller allocations they are not viewed as an institutional player. So, they don’t get the rights of institutional participants such as co-investment or better unit economics, which foreign institutional investors ask for,” said Rajan.
The FoF will pool in capital from multiple family offices and then act as an institutional investor into funds, she added.
Also, given the smaller cheque sizes of most family offices, many prominent domestic funds may not necessarily raise money from them. Pooling capital into a FoF thus allows better access to such fund managers for these family offices.
This is especially the case when a fund becomes successful and raises larger successive funds. Funds managers tend to focus on larger institutional investors who write bigger cheques instead of small family office cheques, thereby reducing access of these family offices to the fund managers’ subsequent funds.
“Family offices are in a way paying the tuition for the fund managers to learn, and the fund managers then go to the larger institutions to raise capital for the longer term. With this fund we are saying that family offices may have paid the tuition, but family offices are also reaping the benefits subsequently by coming in as an institutional force. I think that is something that I’m hoping that this vehicle will actually do. Because we see it very often. There’s just no space for the family office, once you’ve got access to institutional funds,” said Rajan.
The FoF, which has so far received as much as Rs150 crore in soft commitments from a few family offices, will deploy the capital in four to five funds.
These funds will be selected based on both qualitative and quantitative parameters, said Rajan. These include the fund manager’s performance relative to peers, core strategy, quality of the team and succession planning, access to high quality deal flow and exit track record.
Waterfield expects to achieve a first close of the FoF by June-end, followed by a final close by end of September. A first close allows a fund to start deploying the capital raised so far, while continuing its efforts to draw in more capital.
The FoF will be managed by Siddharth Jhunjhunwala, who has previously worked with Asia Alternatives, a fund of funds platform managing $12 billion in assets and Aditya Birla Private Equity.