How do family offices invest?

What is a Family Office?

A family office is a private wealth management firm that will specifically serve the wealth interests of high net worth individuals. A family office will differ from a traditional wealth management firm in that it will offer a complete financial, investment and legal solution to individuals and their families. A family office will commonly look after the wealth interests of a single family or several families.

What is the difference between a Single or Multi-Family Office?

A single family office will, as the name suggests manage the wealth interests of a sole family. Here, the individual will be reassured the family office firm is giving their complete attention and efforts towards your wealth objectives.

A multi-family office will manage a number of high net worth families, all of whom will have different interests, objectives and backgrounds. The benefit here is the shared experience gained from managing the wealth of several families rather than one.

Are family offices institutional investors?

Yes they can be. Over the past decades, family offices have become very sophisticated and are now able to execute and manage transactions that would have been the exclusive remit of large private equity funds or financial institutions in the past. As a result, the advantages for the individual are having a firm with the flexibility of a small independent, but the financial power to seek greater wealth opportunities.

What do family offices commonly invest in?

Today’s family offices are looking to invest in assets that provide above-average returns for their clients, but can weather the storms of periodic economic or financial crises. As a result family offices apply investment strategies that look to longer-term, wealth preserving growth, while seeking new and inventive investment opportunities.

Property

Property has long been a constant pillar in a successful investment portfolio, offering investors a financial asset that has a low correlation to stock market fluctuations. For a family office this is no different, with clients choosing property as a risk averse choice in preserving their wealth for future generations. Family offices may also suggest a property portfolio to entrepreneurial clients and business owners, as these assets are separate to their own commercial interests.

Private Equity

With expert direction by the family office team, clients can benefit from the potential growth offered by private equity. Commonly family offices will financially back the management team or be involved directly with a business that offers high growth potential. Start-ups or businesses entering new markets are often chosen by family offices as they offer the greatest returns. For the family looking for long-term growth the expertise and successful experience of the family office will be the guiding factor of future growth.

Luxury Assets

Its an asset class not without its controversy, but with the right strategy in purchasing, maintaining and selling assets such as yachts and high value cars can bring long-term investment opportunities. Many regard the running costs of luxury vehicles (whether they are land, sea or air based) to be a negative cost centre rather than an asset that grows over time. However the timely purchase and holding of an asset through bear and bull cycles and identifying collectible vehicles such as classic cars that increase in value as demand increases can bring returns that outweigh the maintenance costs.    

ESG Portfolios

As the climate crisis worsens family office investors are adopting an impact investing approach, that looks towards the future. By seeking out ethical and ESG funds that are involved in industries like renewable energy the family office is looking for long-term growth as this area of investment grows further over time.

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Family Business Ventures

Client families looking for a family office to support their financial objectives often wish to include their own business ventures into the offices wealth strategy. This may be their own corporate interests such as companies they own or have shares within, or even a strong professional attachment to a particular industry or investing behaviour.

Crypto Currencies

Depending on the client families attitude towards risk, todays family offices are looking towards future and alternative currencies as an avenue of financial investment. But Cryptocurrencies aren’t for everyone, unsurprisingly with new and unregulated markets risk is high and the family office you’re looking to work with will need to demonstrate a deep understanding of blockchain and the other technologies driving this new digital market.

Why should I use a family office?

One solution a family office may recommend for individuals to efficiently manage their wealth is to create a registered Family Investment Company, that operates as a corporation rather than as an individual. The results can range from more preferential tax rates when passing wealth on to family members, plus voting rights and decision making powers to determine who in the family can make financial decisions. A Family Investment Company might provide additional flexibility to a high net worth family.

>> What is a family investment company?

A dedicated office for wealth, legal and tax

Here at Prydis we are uniquely positioned to keep fees affordable thanks to in-house legal, accounting and wealth management expertise. To start an initial conversation about how an FIC could benefit you and your family, get in touch and one of our advisers will be happy to help.