Family office: Difference between revisions

We know now, thanks the the {{CS report}} that family offices present ''other'' risks: “[[key man]] reliance”, “volatile performance”, “mediocre operational management practices” and “poor [[risk management]] practices and procedures”. And the “potential fraud risk is higher for a family office ... than for a commingled fund managed by an [[SEC]]-registered [[investment adviser]].”

Well, all of those things, presaged and recorded on the permanent record by wise but now departed risk managers came together in one perfect storm of hyper-pressurised [[apocalypse]] when a family office called — well, friends: being a [[horcrux]], you won’t be surprised to know that, in the virtuous circles that comprise the financial markets, it is spoken of only in hushed tones, beneath grave countenances, and obliquely, as ''[[the client who shall not be named]]'' — went up in a [[Carlill v Carbolic Smoke Ball Company|carbolic smoke ball]], taking the thick end of $10 billion of prime broker capital down with it.

There was a further risk, not adverted to in the {{CS report}} but idly speculated upon in the financial press by those with a taste for schadenfreude: ''did'' [[TCWSNBN]] lose all its money, or did it somehow manage to squirrel some of it away? We know the family office withdrew all its excess margin from a number of brokers in the days leading up to the catastrophe — it is presumed, to meet margin calls coming in thick and fast from ''other'' brokers. But each of the brokers has an imperfect, asymmetrical view of their customer’s behaviour. It sees money going out the door; it does not see ''to whom''. Now it is one thing to rob Peter to pay Paul, as the saying has it. But to rob Peter ''and'' Paul and then ''kick the balance out to the sole shareholder in a [[dividend]]''...  would that be brass of a whole different ball game. The JC has no information at all: the suggestion is wild speculation; it seems unlikely and would surely fall foul of voidable preferences in most places, but there remains an uncomfortable technicality of [[corporate veil]]: the family office and its owner are different, legally segregated persons. At first blush, the prime broker’s straightforward contractual claim is limited to the net assets of the corporate entity to which it is contracted.