Written by James Bishop
Rami Cassis, CEO and founder of Parabellum Investments, answers some of the most asked questions about family offices.
A family office can be likened to an ‘ecosystem’ that can manage a family’s assets and keep them organized. Depending on the family’s needs, this could encompass investments, business transactions, philanthropic interests, and the management of multiple households.
According to Credit Suisse, between 6,500 and 10,500 family offices exist globally. But those working in wealth management rarely deal with family offices and because of that they can often miss out on what family office investors can offer.
KPMG iterates that the structures of family offices are “seldom the same”. Their operations can be carried out by a singular individual, such as a bookkeeper, lawyer, or an appointed family member, or alternatively, they can encompass multiple staff members with various internal and third-party advisors at their disposal.
To separate family offices into two distinct types, there are traditional family offices and multi-family offices. A traditional family office is generally a legal entity that centrally manages the substantial wealth of one family, whilst multi-family offices operate for the benefit of several families, who may wish to benefit from economies of scale and share resources.
Family offices will typically employ staff to manage their investments and operations, with the objective of keeping their finances private. These employees will be sworn to secrecy and as part of their contract will be forbidden from openly discussing the details of their work.
For a family office to be determined as an investment structure, KMPG states that the family must be comprised of High-Net-Worth Individuals. A High-Net-Worth Individual is defined as a person with assets of US$30 million or more. Usually, only families with US$1 billion or more will have the mass of resources to justify a dedicated Single-Family Office (SFO).
Families with a smaller valuation of assets may consider the multi-family office approach. In this instance, there is no set amount when it comes to the value of family office assets. While they do have to be substantial, some family offices hold significantly less, while some will hold a great deal more.
When a company approaches a family office for funding, to be an attractive investment it is highly important that the company and sector it is in have high growth potential. While the company must also be transparent regarding any balance sheets and accounts.
In the years to come, family offices are predicted to become more popular due to the increased privacy and control they allow. As powerful investment vehicles, it’s important that those seeking investment capital are aware of their prominence.