Investment banking incubator seeks to bring quality deal flow to family offices

Families seeking access to quality deal flow for co- and direct investments can now access a new fund structure aimed at improving the calibre of deals seen by family offices.

Advisory firm Alberleen Group has developed an investment vehicle designed to meet the needs of family offices and lets private investors co-invest in the proprietary deal flow seen by the firm's cooperative of investment banking teams.

“Far too often, family offices do not see co- or direct investment opportunities until they have already been reviewed by institutional investors and big private equity funds. This often means that the best deals have already been taken by larger investors and it makes it difficult for families to gain access to quality opportunities,” said Jolyne Caruso, chief executive of the New York-based company.

“Through our eight specialist banking teams, we are able to find quality deals and bring them directly to family offices.”

According to the Global Family Office Report 2014, 61% of family offices in North America co-invested together last year. The research found almost half of North American family offices said they had never taken part in syndicated deals facilitated by banks.

Caruso, a veteran investment banker and alumni of Bear Stearns and JP Morgan, founded Alberleen in 2010 as a platform for independent investment banking teams to grow their own businesses in a collaborative environment.

With 32 bankers comprising eight teams, the investment-banking incubator monitors a range of transaction flow across diverse industries – including healthcare, real estate, financial, social impact and energy – to identify early investment opportunities across the United States, Latin America and Asia.

“We are building a community of family offices who are seeking alternative ways to invest outside of the traditional private equity model,” said Caruso. “The platform provides families with proprietary deal flow coupled with decades of asset management experience resulting in high-quality transactions.”

Alberleen's proposition is constructed as a pledge fund. Unlike traditional private equity funds, families – as limited partners – can choose whether or not to invest on a deal-by-deal basis and are not legally obligated to invest the capital pledged.

Each portfolio investment is funded in its own Special Purpose Vehicle and the management fees are charged only on invested capital.

“In a pledge fund structure, investors can opt in or out at their discretion, giving families much more freedom and control than traditional private equity funds,” said Caruso.

Similarly, for bankers tired of working at traditional firms, Alberleen's proposition also provides freedoms which Caruso hopes fosters an entrepreneurial spirit.

Teams work for themselves, developing their own company with the support of Alberleen's management team providing management advice, capital-raising services, deal distribution and broker-dealer infrastructure.

Alberleen sets up each team as limited liability company, providing them with working capital for twelve months and a commitment for seven years.

In return, Alberleen Group takes a top line revenue share of each team's revenue, and by the second year teams are expected to be self-sufficient. After seven years, teams can strike out on their own or become equity partners of Alberleen.

“Our model creates an environment where bankers benefit from a unique combination of independence and a collaborative environment, while our investment approach clearly creates an alignment for family offices who are investing side-by-side in partnership with our firm and its teams,” said Caruso.