Family offices are becoming more popular by the day, and with that rise comes increasing research into growth and diversification. Family offices are privately-owned corporate structures that handle investments and wealth management, specifically for one family or a multi-family office for a number of families.
The most significant difference between a family office and a pension fund, hedge fund, or endowment is that there is no pooling of capital between parties. All of the assets typically come from one family (though sometimes multiple families can work together).
There are many advantages to having a family office. By acquiring a family office, the family ensures that they have hired a team that will care for their wealth management first and foremost. Family offices also tend to help mitigate risk, as it all flows to and from one source.
Investment Growth
Not only are family offices becoming more popular these days, but the ones in existence are getting bolder in their investments. In many ways, they act similar to venture investors – they’re investing in startups.
According to reports, as many as seventy-five per cent of family offices have supported startups in the past. They are also more likely to do so again in the future, as the potential value from startups is unbeatable.
Alternatively, family offices are investing in private equity. According to the UBS and Campden Research’s The Global Family Office Report of 2019, private equity yielded a return average between 8.6% and 16%.
Diversification
Any financial expert out there will strongly recommend diversification whenever possible. This helps protect current assets while broadening the potential for further future growth and income.
Family offices diversify by directly buying (or investing) in privately-owned companies. By investing in a wide range of industries and businesses, a family office can ensure a decent amount of diversification with minimal effort.
Furthermore, family offices can go beyond this level of diversification and step into alternative forms of investing. The bolder offices out there are diversifying portfolios by investing in hedge funds and real estate.
Real estate investments were on the rise before the pandemic, but once COVID-19 hit, building and property prices skyrocketed. Even somebody outside the industry would have an easy time understanding the potential gain here.
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