Multi-Family Offices – Rewriting the LP Strategy

Fireside Chat at the VCCircle LP Summit Mumbai - Bhaskar Chaudhry, Director- Investment & Corporate Advisory, Entrust Family Office Moderator: Anitesh Dharam, Business Head, VCCircle

India’s domestic HNI LP community has grown into a formidable capital base, prompting fund managers to tailor strategies specifically for them. Traditionally, HNIs functioned as passive limited partners (LPs), allocating capital to funds and waiting for returns. However, today’s HNIs—many of whom are first- or second-generation entrepreneurs—are no longer content with a hands-off approach. They seek deeper engagement with funds and portfolio companies. Many have built businesses themselves and bring operational expertise, strategic insights, and an eagerness to contribute beyond capital. They are unafraid to ask tough questions and even roll up their sleeves to help companies strategize and execute. Multi-family offices (MFOs) are playing a crucial role in facilitating this shift.

Financial vs. Strategic Investors

HNI investors generally fall into two categories:

• Financial Investors – These individuals prioritize returns and often seek co-investment opportunities. While they may not demand active involvement, they want to ensure they extract maximum value from their investments.

• Strategic Investors – These HNIs view investments as more than just financial transactions. They seek synergies with their existing businesses, looking for ways to integrate insights from their investments to drive innovation or disruption in their industries. 

The Role of Multi-Family Offices

Despite their willingness to engage, HNIs are busy business leaders with limited time. This is where MFOs add significant value. They conduct in-depth due diligence, analyze fund track records, and continuously monitor performance to make informed recommendations. MFOs also play a pivotal role in representing LPs on fund boards and facilitating exits, which have become increasingly complex in the evolving investment landscape.

While much of the discourse centers on private markets, public markets remain equally crucial. MFOs help HNIs navigate both, leveraging their expertise in direct investments across industries to identify opportunities and mitigate risks.

Meeting Diverse Investment Needs

HNIs have diverse investment requirements spanning fixed income, equity, real estate, personal ventures, impact investing and more. Each of these broad categories offers numerous sub-options. For example, equity comprises both public and private market investments, covering different stages from seed funding to Series C and beyond.

Given the complexity and finite capital available, asset allocation decisions require professional guidance. MFOs help streamline this process, ensuring optimal fund selection. From a fund manager’s perspective, differentiation is key and they need to offer unique value propositions.

Managing Conflicts and Collaboration

HNIs, especially first- and second-generation entrepreneurs, often prefer active participation. While this could lead to potential conflicts, the ecosystem has matured significantly over the past decade. Today’s investors are more structured and transparent in their approach. Fund managers see this evolution as both an opportunity and a challenge—getting a seat at the allocator’s table requires strong performance and a willingness to collaborate with HNI LPs.

Moreover, HNIs invest across multiple funds, providing them with unique market intelligence. Fund managers can leverage this knowledge to refine their strategies. While occasional concerns around information misuse exist, the industry has grown more efficient in handling such issues.

Conclusion

The investment landscape for Indian HNIs is undergoing a paradigm shift. No longer content with passive investing, they are actively shaping the future of the funds they invest in. Multi-family offices serve as the bridge, enabling them to navigate complex investment decisions while optimizing their portfolios. As the ecosystem evolves, collaboration between LPs, GPs, and MFOs will redefine how capital is deployed, making the investment process more sophisticated, strategic, and impactful.

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