Financial Management and Risk Framework for a Single-Family Office

The goal of the thesis is to analyse the possibility to integrate private equity investments into the overall portfolio of a single-family office. The focus lies on optimizing returns while adhering to a strict risk management framework to keep a defensive portfolio.

Kim Studer, 2024

Art der Arbeit Bachelor Thesis
Auftraggebende Bluerain Partners Group AG
Betreuende Dozierende Haverals, Jacqueline
Keywords Private Equity, Family Office, Portfolio Optimization, Risk
Views: 8
As the client (BRP) becomes more mature, new investment opportunities arise. The opportunity to invest in alternative investments such as private equity has become a viable option and has already been done to a certain degree. The challenge is that no structured approach exists to determine what size, or if at all, the portfolio of private equity should be pursued to increase total return while still operating within the given risk boundaries. In addition, no research has been done so far in terms of the amount of funding that needs to be committed to maintain such a portfolio.
The research utilises both a qualitative and quantitative approach. The qualitative research consists of expert interviews with industry specialists as well as a literature review. The quantitative research utilized an explorative and comparative approach meaning the calculation of new portfolios and comparing the results to historical data and benchmarking the results. For the private equity analysis, assumptions that were found in the qualitative research were made due to the lack of public data in this field.
The research concludes, that while investments in private equity can prove to be lucrative, it is not suitable for a family office like BRP due to the high entry barriers and the strict risk tolerance applied by BRP. The analysis suggests, that in order to sustainably invest in private equity, it demands a total portfolio of at least CHF 750m, as the investments in private equity should not exceed 20% of the total portfolio to still adhere to the defensive strategy. Also, the demanded size of the operation, in order to be able to manage such a portfolio, exceeds the current size of BRP. Additionally, the study provides BRP with an optimization for the publicly traded portfolio, showing the advantages of an optimally diversified portfolio in terms of the risk and return trade-off, meaning an increase in returns while decreasing the standard deviation also referred to as risk. The applied risk framework, which divides the risk into capacity, appetite and tolerance, indicates that no tolerance can currently be assigned to a private equity portfolio within BRP’s structure.
Studiengang: Business Administration International Management (Bachelor)
Vertraulichkeit: öffentlich
Art der Arbeit
Bachelor Thesis
Auftraggebende
Bluerain Partners Group AG, Altendorf
Autorinnen und Autoren
Kim Studer
Betreuende Dozierende
Haverals, Jacqueline
Publikationsjahr
2024
Sprache der Arbeit
Englisch
Vertraulichkeit
öffentlich
Studiengang
Business Administration International Management (Bachelor)
Standort Studiengang
Brugg-Windisch
Keywords
Private Equity, Family Office, Portfolio Optimization, Risk