One of Australia’s oldest and most mature family offices, Cambooya, is taking a wait-and-see posture to new investments this year, viewing equities as over-priced and doubtful that private equity opportunities will be as lucrative as many believe, according to its head of investments, Kathryn Young.
Cambooya has amassed a significant war chest of liquidity that it is keen to deploy as opportunities arise, Young tells Market Narratives, a podcast series hosted by Investment Magazine’s head of institutional content Alex Proimos.
To listen to the full interview with Kathryn Young on the Market Narratives podcast click above or find the series and episode on Apple Podcasts, Google Podcasts or Spotify.
But Cambooya is “not even looking to listed equities for opportunities at this stage”, having invested in opportunities that arose in March, and viewing listed equities as “pretty expensive”, Young says.
And while there is talk of a “golden wave of private equity opportunities” arising from the current economic crisis as the stimulus is unwound, Young says, she is not yet convinced this will be the case.
“The question is: Is that going to be in areas that you really want to… consider an opportunity?” Young asks. “I think one of the things that is interesting about this crisis, as everyone knows, is that it’s a lot more visible which sectors are going to be the most impaired. So I’m not sure that means there will be this wave of opportunities that we are hoping there will be.”
Operating since the 1980s, Cambooya is a relatively mature family office servicing multiple generations and family groups of the Fairfax family by managing investments, providing investment advice, doing tax and accounting work and managing their foundations.
The office has an internal team of five people with “broad” rather than “deep” skills, which enables them to cover a lot of ground on different types of investment strategies and asset classes, Young says.
“We can cover property, private equity, credit, equities, alternatives in-house, but then we use experts, we use advisers to… go deeper into those areas and bring us ideas,” Young says.
Cambooya also has an external investment committee that functions as independent experts. This committee doesn’t make the final decision on investments, nor does the in-house team report to them, but they advise the family directly on important decisions and are an additional check on the family office.
“They play a very important role because they help the family get comfortable… and that the internal team remains strong and focused on the right areas,” Young says. “But they also help us get more depth in specific areas, because those investment committee members all have different backgrounds, so they bring depth in different areas to the equation.”
While family offices vary enormously in their investment approach, they are less constrained by the regulation, liquidity constraints and peer sensitivity affecting superannuation funds.
They are typically less liquid than a comparably-sized small industry superannuation fund, Young says, and are often more concentrated in their allocations to particular asset classes, as well as within asset classes to specific investments.
And while a common perception of family offices is that they are risk-averse, this is “not as true as people think”, Young says, particularly when controlled by the original wealth-maker who typically is a businessperson with a high tolerance for risk.
As the wealth is passed to successive generations, members understand that not taking risk is itself a risk because time and inflation will erode the funds, Young adds.
The relative freedom family offices enjoy does sometimes come at a cost, however, as they need to ensure they are closely aligned with the personalities and investment philosophies of the family members.
And being more opaque than superannuation funds, they can tend towards being inwardly focused and need to ensure they stay active in their peer network to stay on top of their game.
“One of the great things [about running a family office] is that you’re not competing with your peers,” Young says. “They can be a great resource, and so you need to stay active working with them and giving back to that network as well, and making sure that you really think deeply about what other people are doing and how you can potentially use that in your organisation.”