Put Your Money Where Your Mouth Is
 

For many HNW individuals the best deals are hard to access or are simply not available. Operating within a well-regarded family office can open that door.

The deep network that working as part of a team and alongside family members brings allows a level of access that acting alone often can’t.

The benefits of this are usually reserved for the family members. But for Joe Roos, chief investment officer at ZFO, the Florida-based family office of Mark Zittman, an early employee of Guggenheim Partners, the role comes with an added advantage that not many are afforded: The ability to get in on the action.

As CIO, Roos actively manages the family office’s highly diversified, venture capital heavy portfolio. In addition, he is often seen co-investing alongside ZFO on deals that match his own personal risk preferences, albeit with smaller stakes.

“It is a great way to align incentives,” he said. “It benefits the family because I am putting my personal capital at risk alongside theirs. I am not going to advocate for something I’m not personally willing to invest in.”

Of course, the practice of co-investing in this way could also reinforce conviction in potentially bad strategies. Theoretically, if a CIO were determined to get in on a deal but knew it might not be the best fit for the principal, it could lead to bad outcomes. And if the deal was unsuccessful, it may have a greater impact on the junior party. Access to deals is limited intentionally, after all.

As with any close alignment between principals and executives, the approach requires trust and careful governance. 

But generally speaking this alignment is symbiotic: Zittman gains a level of confidence in his CIOs decisions and recommendations, while Roos stands to gain significantly by accessing previously inaccessible, lucrative deals.

In the five years since he started working for Zittman, Roos told me he has entered somewhere between 15 and 20 of the 100 or more investments that ZFO has completed, constrained only by the relative size of his own capital.