Family Legacy Capital structures its investments, all of which are in the United States, as loans to family businesses with revenues of $ 25 million to $ 100 million. Investments range from $ 10 million to $ 50 million and will last three to five years, though the fund expects many families to return the money in half that time if their businesses improve.
The fund expects annual low double-digit returns that are well above those of regular debt investors. However, the higher returns take into account the higher risk associated with investing in weak companies. However, because the investments are backed by the company’s assets, the fund’s investors have recourse if families struggle to repay loans.
“Low risk is an important component for the families investing in these companies,” said Hendrik Jordaan, chairman and founder of Family Legacy Capital. “We are not only bringing the capital, but also the family ethos.”
Mr. Jordaan also runs One Thousand & One Voices, a similar private equity fund focused on investing in Africa. Investors include the family of John Coors, a great-grandson of the founder of Coors Brewing.
Mr Jordaan said it was a natural response to the pandemic to bring families together for a fund that would help other family businesses.
“Imagine you have one of the world’s largest consumer product families in your investor base and you ask them, ‘Which family businesses in your supply chain have you done business with for decades but they are in trouble because of Covid?’ ” he said. “If you know that your partners are a community of families and you care about preserving your legacy, the more likely you are working with a family. Our families want to know if their capital has made a difference. “
Widger said the Family Legacy Capital fund – which includes three other wealthy families who chose not to be named – is doing research before investing. Questions are asked about what the company is trying to create and how it is doing it. But the fund also wants to evaluate the family behind the company and understand what that family needs to run their business successfully.
Culture is the key, said Mr Widger. “Families can get dysfunctional, but family businesses tend to have really attractive cultures,” he said. “It is human nature to include your children in your business. There is something in the chemistry involved in working with family members. But you still have to be able to have a good vision. “