Family offices with assets in excess of $1bn are increasingly opting for quantitative trading strategies as a cost-effective alternative to traditional hedge funds, according to a report by Bloomberg citing a Citigroup executive.
The report quotes Hannes Hofmann, Global Head of Citi’s Family Office Group: “A lot of family offices think hedge funds are too expensive.”
He also highlighted that family offices are turning to systematic strategies to protect against market volatility at a lower cost: “What’s particularly interesting for family offices today is the hedging opportunity.”
One of Citigroup’s largest family office clients recently allocated a nine-figure sum to quantitative strategies to hedge against downturns in real estate and equity assets. This strategy involves frequently rolling over options to mitigate risk.
“Typically, the family offices with these strategies are big enough that they have some specialists on their team,” Hofmann said, though he declined to disclose specific client names. He noted that this trend is global, with family offices in Europe and the Middle East showing significant interest.
According to a Goldman Sachs report, average hedge fund management and performance fees in 2023 were 1.7% and 17.7%, respectively, while quantitative strategies offer a less costly way to achieve similar risk management and returns.
