The family office world is looking more and more attractive to investors, from what we’ve seen via our FINTRX Platform. While the recent bull market in U.S. equities has provided extraordinary returns, investors see the need to get creative for the next era of market returns. Valuable deals are available, credit is cheap and soaring confidence makes this a great stage for private deals.
These firms are, in turn, concerned with access to private deals, technology/cyber-security and finding, hiring and retaining quality staff. These concerns only grow in importance with the size of the family's wealth.
The shift in size and expertise of family offices has certainly been enhanced by the regulatory changes brought about by the Dodd-Frank Act in 2010. Per Dodd-Frank, family offices don't have to register with federal regulators as long as they limit their investment advice to descendants. As a result of Dodd-Frank, a number of hedge funds in recent years have chosen to become family offices, with hedge fund talent migrating to these newly formed family offices as well, an indication of the popularity and long-term benefits of family office investments. With low interest rates and a desire for higher returns, these managers turned to direct private capital.
Family offices at the highest end are well positioned to join together to benefit. As an emerging and relatively small industry, the best resources for family offices are often other family offices. Family offices, and all ultra-high-net-worth families for that matter, seek out each other not only to pool capital, but also to share ideas, resources, learnings, and shared institutional experiences.
And there's so much more to family offices than pursuing private deals. Privacy, control and the pooling of assets are great reasons to have a family office, but what about philanthropy, family governance, cash flow management, and continuity? Between the 10,000 family offices globally and 2,473 billionaires, there are about 7,500 family offices organized for a wide range of reasons. Superior investment policies help achieve financial goals, and well-coordinated mission and governance policies promote a sustainable legacy.