May 11, 2023: A club for the world's wealthiest families
Lex van Dam has established a storied career in family offices. Beginning his finance journey at Goldman Sachs as a prop trader, he eventually found his way to Rinkelberg Capital, a Dutch single-family office based in London. His expertise within the deal space led him to his latest venture—the SFO Alliance. This membership club for the world’s wealthiest families brings together like-minded investors to brainstorm and share deal flow. Below, van Dam shares his story with Crain Currency.
You’re a seasoned single-family office professional who decided to launch a networking group for like-minded families. As we know, it’s been done before. How is the SFO Alliance different?
The big difference to other networks is that we are a peer-to-peer community of investment professionals and principals focused only on larger single-family offices, where most others let anyone in who calls themselves a single-family office. And we connect people all over the world, with a focus on the USA and Europe, where most other networks have a more local focus.
Let’s talk deals. How does the SFO Alliance help families source deals in a crowded market?
Our members suffer from a lack of bandwidth, with relatively small teams that cannot be experts in everything at all times. However, as a group, our members have a fantastic ability to source and invest in the best deals. What we aim to do is connect like-minded families that are investing in the same area at any point in time.
How is the membership constructed, and what types of benefits do members receive?
As I mentioned, we focus on large SFOs mainly in Europe and the USA. We have over 700 principals and executives from about 500 families in the network at the moment. We are very focused on only the largest, noncommercial single-family offices with assets over $400 million. We don’t charge membership fees, there is no brokerage or commission, and personal details are not shared with other members or outside parties. A lot of our members are very private and don’t want any information shared unless they choose to.
From where you sit, what’s trending now in the direct-deal space?
Some of our members only invest in funds, some only direct, and many do both. There is a recent trend toward more funds, as people have been burned in directs, especially in the tech space. There is a renewed interest in private credit, with equity-type returns and fixed-income-type risk. Sustainability is, of course, huge as well. But the other side of the coin is also trending — where people invest in opportunities that the big companies need to divest because they are not “green” enough. Space and AI remain popular, and what people like is that the pricing of deals has come down a lot — anyone with cash and an ability to write tickets is able to benefit from great valuations.
You’ve launched an annual conference to coincide with the alliance. Tell us about that.
Our big conference is called SFO Week, which is June 14-15 this year in London, and we expect about 200 large families to attend. We are no fans of fireside chats, and that is why we focus on topical, hollow-square, roundtable dialogues led by family office moderators with input from many of those present.
Some of this year’s most popular sessions are co-investing with other families, food technology, energy transition, private credit opportunities, how to position your tech portfolio for 2024, structuring the family office for success, as well as family office compensation. We, of course, have some amazing, very high-profile keynotes, but the dialogues are where the real action is. If anyone is interested, we are happy to provide complimentary tickets to qualifying readers of Crain Currency.
What is your future vision, and how do you plan to grow the SFO Alliance?
The vision is that we need 1,000 families for people to find the 10 to 20 families that they would like to talk to right now. The way we grow is by recommendation. We are a network of investment professionals, and for us, they are not a product to be sold, which is what most other networks do. We aim to be a safe place where the members have huge input in how we do things and help us improve continuously.
Interview conducted by Kristen Oliveri
What you need to know about the tax impacts of your philanthropy
The tax impact of the philanthropic activities of family offices and private enterprises was recently the topic of a discussion by Mike Linter, global head of private enterprise tax, global tax and legal at KPMG International, and his colleague Greg Limb, global head of family office and private client. Linter kindly allowed us to share it with Crain Currency readers.
From a tax perspective, how can private enterprises look to enhance tax-efficient giving?
Mike Linter: The first step is choosing the right structure. The framework for effective giving will naturally vary from country to country and person to person, but the important common thread is that a strategic framework is necessary to provide direction to activity, to provide the basis for measuring impact, to enable meaningful collaboration and to provide a sustainable forum.
Choosing the right structure for activity is dependent on many different factors, including local regulations, tax regimes, cultural norms and historical activity, as well as whether it is pursued personally or via a business. The ultimate purpose for giving will likely factor in that decision-making. Family and corporate foundations are the most commonly adopted structures, and for good reason. They can help provide clarity on where to direct funds and how to respond to requests for funding. More important, they provide the vehicle to engage and collaborate with other foundations, philanthropists, governments and NGOs.
Direct giving continues, however, to remain popular and effective, allowing philanthropists and their families to support more personal projects, often in communities and causes near to them.
On that note, many businesses decide to keep the family philanthropy separate from the company policy on philanthropy, so that the one does not succumb to the constraints of the other, even if they have similar values and motivations. In this way, neither the reputation of the family nor of the business is at stake, should either of them be subjected to criticism.
Greg Limb: I’d like to add that there is no “one size fits all” in terms of choosing the right structure for philanthropic activity. So rather than jump to an approach, it is important to understand the “why” to help get to the best “how.”
Successful entrepreneurs often want to give back in terms of money, time and expertise. They also want to be able to demonstrate the impact of their activities. To illustrate this, let’s say a client wished to help startup businesses struggling to obtain financing following a similar experience at the beginning of their career. Initially, credit facilities were provided on an ad hoc basis but without a strategy or clear plan of what they wanted to achieve. It proved difficult to measure the impact, which took away some of the passion. This is where some formality in terms of the criteria for helping startups, the services to provide and what is expected in return are key in helping to ensure that the philanthropist creates maximum impact. In this instance, a not-for-profit company was suggested to provide some separation from him personally, too.
Corporate experience also plays a role in choosing the right structure. Philanthropists with their roots in private equity, for example, adopt structures where they can bring about the most effective change and that enable levers to be pulled to ripple change over a much wider area, whereas those from a venture capital background choose structures that allow them to stay close to projects in which they invest and see firsthand how the money is used.
What emerging trends are you seeing in the space today?
Greg Limb: Two main trends have emerged in recent years — the trend to measure and demonstrate impact and the trend of impact investing.
First, one of the most significant changes to emerge from today’s philanthropists is the recognition of the need to measure and demonstrate impact. While today’s philanthropists may be driven by the same desires as their forebears — wanting to give back to society — they differ in the confidence of their ambition, their international reach, the structures adopted and the discipline of measuring impact. The influence of commercial enterprise and the greater discipline adopted by philanthropists are changing the way activity is measured and evaluated. It is not, however, a perfected art, with philanthropists only now beginning to explore the role that increased amounts of data available to them can play. Measuring the return on investment and the return on effort will continue to evolve and change as philanthropists have ever-greater access to data from the projects and causes they support.
Another significant change in today’s philanthropists is the emergence of impact investing and intentional giving. Technology has not only enabled a new channel for donations but also a platform to expose systemic inequities, raise public awareness about the need for change and highlight global leading practices. With this awareness, private enterprises are becoming more intentional about their philanthropy. For instance, many private enterprises are serious about integrating environmental, social and governance (ESG) factors into their operations, whether it’s addressing climate impacts of the business, making donations to the community, enhancing health and safety or ensuring board diversity.
While impact investing is still in its infancy, there is a shared belief among philanthropists that their proportionate allocation will increase substantially over the short term. At the same time, we are witnessing large global capital allocations toward ESG investment strategies. All this capital is seeking impact — the core business of philanthropic organizations. Philanthropists will, naturally, have different goals and aims, but there is a clear trend toward impact investment where track record and measurable societal impact are aligned.