Wendy Craft has more than 20 years of experience in family-office work. Currently chief of staff at New York-based Fulcrum Equities, she was previously at the Gonzalez Family Office, MFR Equities and Schneider & Schneider.
How is the family-office perspective different from most of what you hear about in the world of investments?
On the nonfamily-office side, that’s usually the sell side. And on the sell side, what happens is they’re always trying. They’re always worried about their returns, and they’re worried about their returns because that’s how they sell it to investors. I’m not saying that investors and family offices are not worried about returns — we are. But most family offices aren’t going to say, “I’m not investing in that unless I’m getting 20% back.”
A lot of family offices have a much longer view. They've been around for 100 or 150 years, some of them, or 50 years, and their investments are in things that are going to provide long-term growth. So let’s say they have to kick out 5% to give a payment to each one of the heirs. They just need 7% or 8%, and they’re going to usually side on something that’s just a slightly bit safer and less volatile. Family offices need to sustain growth, and they can’t go into crazy investments with crazy returns and put the legacy of the family at risk. 
So usually they’ll have a portion — if they’re inclined to do so — that goes into startups or seeds, or angels, or venture, where there might be higher returns. But they’ll have a lot of the bulk of the legacy family office in something slightly more conservative that will grow over time.
Where does that leave family offices as they consider current economic conditions?
Families are now sitting there going, “What is the signaling?” Are we headed for an earnings recession, which is much scarier to us than inflation? Because for the families of wealth, inflation isn’t as critical as it is for other folks. But an earnings recession is. Earnings are used for distribution to the family members and to their trusts.
When we put that into the context of the larger economic discussion, it sounds like you’re saying that family offices are more aligned with labor than corporations or those that often invest in them, which tend to want to see cost cuts in times of economic uncertainty.
I would say yes for some family offices. The family office that owned 20 John Deere stores, the family offices that are in real estate, family offices that made their money in publishing, those kinds of things tend to be as a trend more conservative [in their approach to investment risk and reward].
That’s for a lot of family offices, but not everyone. There are family offices where the principal made their money in the financial markets, and they’re going to be much more aggressive on their investments.
Are there any large-scale changes or trends you’re seeing in the family-office world?
I’ll tell you something very interesting [that] I noticed during COVID, [with] a lot of family offices who had never — not one time in their glorious history — invested in venture, let alone angels to companies, any of that. When we went to Zoom, because you couldn’t meet with people face to face, and you couldn’t go visit all the little companies like we had traditionally done for 50 or 60 years, all of a sudden these families started investing in earlier stages, like late-stage venture. So you started seeing some shifting in what families invested in toward early-stage things because of the way that these opportunities were being communicated to them and because of the way they could view them. The end result was that you now have more family offices than pre-COVID who are investing in earlier-stage — and by that I mean late-stage venture — than we had before COVID.
It changed things. It changed a mindset of “Oh, we’re just a real estate family” to “Now, we’re just a real estate family who happened to put some money into Pfizer, Moderna, or masks, or whatever.”
Whether it goes back, now that things have opened up, I don’t think so. I think we have a next gen coming up that is much more open-minded and willing to use the internet and be on Zoom and do all these things. And the old guard is starting to age out, and what’s coming is going to be fascinating because the way they interact with the world and with technology is so very different than the 50-plus group that’s currently in charge of most of the family offices, either as a family member or as an executive.