As president of a multifamily office during the 1980s, Bill Elkus felt limited by the investment options available at the time. Because the products Wall Street offered seemed limited, Elkus—who is now the managing director of Clearstone Venture Partners in Santa Monica, Calif.—decided to take matters into his own hands. “I thought, instead of buying whatever products Wall Street comes up with, why not create our own investment vehicles?” he recalls. “So we came up with the idea of creating investment boutiques where we would be the lead investor.”
 Through these boutiques (essentially, small investment firms) his clients would provide the seed money a talented trader or portfolio manager needed to launch a private equity or hedge fund. The manager would bring in additional investors and charge the usual fees. In this way, Elkus’s family office clients gained access to the investment strategies they wanted through funds specializing in, among other things, real estate, leveraged buyouts and arbitrage investments. As stakeholders in the boutique firm, as well as investors in its funds, they were doubly rewarded if managers prospered.
What was at that time an exotic and daring strategy has become more common, though these days the attraction between aspiring fund managers and family offices is mutual. The number of individuals, families and family offices that help new funds get started is unknown. Observers, however, say that new venture capital, leveraged buyout and hedge funds often prefer seed money from family firms to that of institutions such as pension funds and university endowments. Unlike institutions, family firms are not required to invest billions of dollars at a time or answer to their constituents for results each quarter. While they often do expect favorable treatment, family firms will not demand the onerous terms that institutions do—such as wanting to both be the largest investor and have the right to withdraw money at any time—that can scare off other investors.
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