Single family offices are increasingly concerned with investing in alternatives. According to Angelo Robles, founder and CEO of the Family Office Association, “Very often, single-family offices… have their hands on the pulse of the investment community and are [therefore] always seeking high-quality opportunities. Increasingly, single-family offices are identifying places to put their money that can do well no matter which direction the markets go.”
In a survey of 199 single-family offices, all reported interest in identifying non-traditional but highly credible investment opportunities. An example of this is the increasing amounts of money single-family offices are committing to such new sectors as cryptocurrencies and blockchain technology. If these investment opportunities move independent of the stock and fixed income markets, better yet.
Some of the more esoteric investment opportunities some single-family offices are considering include litigation financing, seed money for entertainers and artists, and one-off projects. With regards to litigation financing, commercial litigation can be difficult, time consuming, and expensive. In situations where the plaintiffs, while certainly justified in suing, cannot afford to do so (especially against deep-pocket defendants) has led the rise of litigation financing.
As for seeding arts and entertainment, many times aspiring and talented entertainers and artists have had to deal with significant financial hardships as they pursue their craft. Some SFOs are providing economic support for creative and gifted individuals for a piece of their future revenue stream.
Lastly, regarding one-time, one-off projects, a growing number of single-family offices are investing in these ventures. This covers a diverse range of endeavors and is exemplified by them providing financing for such things as movies and TV shows.
“An important consideration with respect to some of the more esoteric investments of some single-family offices is their ability to mitigate taxes,” says Rick Flynn, Co-CEO and founding partner of LVW/Flynn and author of The High-Functioning Single-Family Office. “As single-family offices have become more and more professional, tax mitigation tied to their investment portfolios has become a critical factor in driving the appeal of private placement life insurance, for example.”
From this, it is evident that a meaningful percentage of single-family offices are looking to incorporate non-traditional investments into their portfolios. Part of the attraction of these investments is the ability of senior management to minimize the tax implications.
As family offices continue to tap in to a variety of sectors, take advantage with our FINTRX Family Office Platform.