Family office in search of emerging managers to make AI bets

Early-stage investments are important if family offices want to take advantage of emerging AI trends that can disrupt or transform businesses, said Carman Chan of Click Ventures, as she explained how she selects emerging managers.
Family office in search of emerging managers to make AI bets

A family office with operations in Hong Kong and Singapore is looking to increase exposure to artificial intelligence (AI) through fund investments as it considers 2024 one of the best vintage year to make AI-related bets via early stage venture capital.

"If you focus on AI related opportunities, this year and next year will be one of the best vintages," according to Carman Chan, founder and managing partner at Click Ventures.

The family office has currently invested with 12 managers.

It started investing in AI from last year, and so far, has made one investment in an AI-focused VC fund, Chan said at a fireside discussion at AsianInvestor’s Family Office Briefing in Hong Kong on June 18.

“We are also looking at other funds and fund of funds focused on AI,” she said.

The family office typically invests in emerging VCs funds that that look for startups leveraging new AI technologies that have the potential to disrupt or transform traditional business models.

Often, this means investing in seed-stage venture capital funds.

To increase the success of such early-stage VC fund investments, family offices should look for emerging managers with specific knowledge on the sector and how the technology might disrupt industries, said Chan.

Carman Chan
Click Ventures

“Selecting emerging managers are like selecting startups, so it's high risk, high return, and you must build a portfolio. You cannot just invest in one or two because it may be too risky.” 

Chan, a tech entrepreneur turned venture capital investor, emphasised that seed fund managers need to have a thorough understanding of the underlying technology.

“Seed fund managers need to understand the technology and what kind of business models that can benefit by these technologies. That is why emerging manager selection is really related to the knowledge that each manager has,” Chan said.


Another key requirement is their ability to see how emerging technology can disrupt existing business models.

“Most of these companies looking for seed capital are trying to disrupt an old model, or they are trying to redesign a new business model for certain industries,” Chan said.

She illustrated her point by noting that that physical products like compact discs, or CDs, were disrupted by music software programs like iTunes and portable media players like iPods, which in turn, were disrupted by music streaming services like Spotify and smartphones.

“That is why the understanding of what kind of technology that can benefit kind specific business models is very important, especially if you look at fund managers who focus on seed stage investments."

Also read: Family office scouts for opportunities leveraging AI tech

Artificial intelligence is one example where it makes sense to for family offices to get in at the seed capital stage. If not, the price might quickly be beyond reach.

“We want to focus on the seed fund, because only at this stage, the valuation of the company is still reasonable. It's not that crazy. For series A funding, most of the valuations in AI startups is already more than $100 million,” Chan said.

Still, its important to understand the sector before investing. If a family office does not have sufficient knoweldge, it might be better off investing in AI-related venture capital at a later stage through a fund manager.

“It is good to work with fund managers instead of just doing direct early-stage investments internally because I find that for family offices, it is usually very difficult to hire relevant experts in this market to do this kind of investments internally,” Chan said.


She explained that technology advancements during the COVID-19 pandemic  are also helping emerging fund managers to streamline back office operations.

“LPs are also starting to accept emerging managers and accept solo GPs. We see that some of the solo GPs are actually outperforming a lot of other GPs,” she said.

Another trend is that US investors, including endowment funds or fund of funds, are starting their own emerging manager program.

Other assets owners are also starting to support such programs to accelerate growth in the industry.

“In total, these emerging manager accelerator programs generate more than 1,000 emerging managers every year,” she said.

Large North American asset owners are trend-setters on this front.

In April 2023, Canadian pension fund manager Caisse de dépôt et placement du Québec (CDPQ) renewed its collaboration with the Québec Emerging Managers Program (QEMP).

The Emerging Manager Program of the New York State Common Retirement Fund (NYRF) invests with emerging managers directly, or with the assistance of managers of managers or program partners, in separately managed accounts or commingled funds.

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