- The number of family offices worldwide is up 38 per cent in the last two years to 7,300, says Campden Research
- Total global wealth under management by family offices has risen to US$5.9 trillion
The number of family offices around the globe has risen rapidly after years of wealth accumulation in the wake of aggressive monetary easing by global central banks.
There are now 7,300 offices, an increase of 38 per cent in the last two years, according to Campden Research, while total assets under management were US$5.9 trillion and the wealth of the families behind them stood at US$9.4 trillion.
Campden Research, a division of Campden Wealth, a family office membership association, monitors the private wealth management arms of the world's richest individuals and families.
North America had the largest share of family offices, with 3,100 or 42 per cent of the total, while Asia-Pacific had 1,300 offices, and Europe had 2,300. Emerging markets, consisting of South America, Africa and the Middle East, were home to 600 family offices.
During the last two years, the number of Asia-Pacific family -offices rose 44 per cent, while in North America they grew 41 per cent and, in Europe, 28 per cent.
"It is becoming a growing trend within the ultra-high-net worth community to have a family office. Whilst wealth holders often initially set up a family office to further 'professionalise' their wealth management practices, these offices often evolve to host other services that are beneficial to families," said Rebecca Gooch, director of research, Campden Wealth.
Family offices will handle investments and accounting issues for families, but have also been known to handle other tasks, such as social relations between family members or yachting holidays. Estimates vary, but Campden Wealth said that family offices often become financially feasible for families with more than US$150 million in assets.
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Defining a family office can be difficult, and estimates of their size and number vary. A small accounting department at a private family business could become a de facto family office. Family offices also benefit from privacy and a lack of reporting requirements.
Some families opt for multifamily office structures, in which a group of professionals work on behalf of two or more families.
Gooch said the success of Hong Kong, Singapore, Dubai and Mumbai as places favoured by family offices was due to "favourable financial incentives and access to top-end wealth management expertise".
While family offices are associated with wealth and status, they also offer those with high net worth a way to directly access investment opportunities.
"Family offices are also favoured for their ability to reduce costs by providing services in-house, thereby cutting out the middlemen and women," said Gooch.
The 2019 Global Investment Survey by the US-based Family Office Exchange indicated that family offices are increasingly turning to direct investments rather than investing in funds. In 2018, direct investments in private equity and real estate exceeded those made to private equity and real estate funds. Direct investments constituted 18 per cent of the total asset allocation of family offices surveyed. Allocations to hedge funds were down from 12 per cent in 2014 to less than 6 per cent in 2018.
Growth in family offices may slow in the years to come. Last year, Wealth-X reported the number of billionaires rose nearly 15 per cent globally, with total wealth rising nearly 25 per cent, thanks to booming equity markets. This year, the net worth of the world's billionaires declined by 7 per cent to US$8.6 trillion, while the billionaire population declined by 5.4 per cent.
The decline was pronounced in Asia-Pacific, thanks in part to global uncertainty around the US-China trade war.
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