Contributors: Benjamin Stupples
Updated on September 12, 10:30 AM EDT
What You Need To Know
Family offices are popping up everywhere. The privately owned, typically discrete firms that manage the financial affairs of the world’s ultra-rich are becoming increasingly popular due to surging fortunes among Silicon Valley founders, Asia entrepreneurs and Middle Eastern dynasties.
Alphabet Inc. co-founder Sergey Brin, hedge fund billionaire Ray Dalio and Longfor Group chair Wu Yajun all have their own firms. So do legendary investors George Soros and Stanley Druckenmiller. Many family offices have multibillion-dollar portfolios of US stocks and, unlike banks and mutual funds, can shift their positions quickly as conditions change, potentially moving markets.
With families typically guarding the details of their fortunes, gaining insight into their strategies can be difficult. Researcher Campden Wealth estimates that family offices oversee at least $6 trillion in assets, more than the amount hedge funds manage, but the actual sum could be even bigger.
That opaqueness can also lead to trouble. The $20 billion implosion of Bill Hwang’s Archegos Capital Management, which happened after the family office built up massive, concentrated equity positions in virtual secrecy, sent shockwaves through global finance and put the loosely regulated firms in the sights of US authorities.
Family offices do more than just manage money. They typically cater to a single fortune and can employ dozens of staff to pick investments, file taxes, pay bills, oversee philanthropic missions and manage yachts, homes and other hard assets.
There are more than 10,000 family offices globally that cater to a single fortune, with at least half started in the past two decades, according to Ernst & Young. Learning more about family offices could help deepen your knowledge of how the world’s richest people are spending their money across business, philanthropy and art. This guide is intended to help you get started.
Why It Matters
Family offices are becoming more professional, with the largest of them operating like sophisticated investment firms. They strike out solo, or team up to buy and sell businesses, startups and real estate. Financial firms are feeling the pressure, and looking to woo family offices as clients.
Family offices are attracting top Wall Street talent, too. Soros’s $28 billion family office hired Dawn Fitzpatrick, who led the O’Connor hedge fund unit at UBS Group AG’s money-management arm, as its chief investment officer in 2017. After running Goldman Sachs Group Inc.’s investment bank, Gregg Lemkau in 2021 joined an investment firm that grew out of the family office of Michael Dell, founder of Dell Technologies Inc.
Archegos’s stocks went up and then they went down.
Cap Expand Partners sharing news from: www.bloomberg.com