A Family Office refers to the small entities that handle financial or non-financial affairs for ultra-high-net-worth families. As the industry grows, Family Offices have gradually evolved into more sophisticated and professionalised institutions. This article explores the increased professionalisation of Family Offices and what this could mean for your Family Office.
How do Family Offices professionalise?
The Citi Private Bank Global Family Office Insights 2023 highlighted this increased professionalisation of Family Offices, particularly in the investment function. The report concluded that 64% of respondents have an investment committee with another half saying that they have an investment policy statement (IPS) in place.
As mentioned in one of our previous Forbes articles, an Investment Committee and IPS can be greatly beneficial to a Family Office. An Investment Committee can ensure that all investment decisions are made in alignment with the Family Office’s interests and objectives. It provides transparency into investment decisions and allows for open discussions of the portfolio performance. The Family Office will also benefit from the variety of perspectives and expertise offered by the Investment Committee. The IPS is the foundation of all the investment strategies of a Family Office. It outlines the expected return as well as the risk tolerance of the Family Office. The presence of these two is a great indication of the level of professionalisation in the investment function of Family Offices.
However, the report also noted that the progress of professionalisation is uneven. The investment function of the Family Office is generally the most advanced compared to other functions. Beyond investment, it was revealed that about two-thirds of families have separated their Family Office from the family business and have clear processes and internal controls in place. While less than half have governing boards or formal strategic plans, about one in five are working on it.
Key drivers of professionalisation
According to the Citi Private Bank report, Family Offices worldwide are shifting focus to wealth and investment management over family unity and continuity. This has boosted the professionalisation of the investment function of Family Offices. On top of that, the growing interest in alternative assets has also driven the need for a more professionalised investment function within a Family Office.
The UBS Global Family Office Report 2023 reveals that currently, alternative assets such as private equity, venture capital, hedge funds, and real estate account for 45% of the asset allocations amongst Family Offices worldwide. While alternative assets offer the potential for higher returns, they also come with greater complexity and risk that require more active management. This necessitates a sophisticated and institutionalised approach to investment management, fostering the professionalisation of Family Offices.
How can Agreus help?
As Family Offices continue to evolve, they will eventually look beyond the investment function and gradually professionalise other functions. We predict that a well-rounded institutionalised Family Office that offers a broad range of professional services will become a norm in the near future.
Additionally, as Family Offices continue to professionalise, they will require high-calibre professionals to match. Finding a perfect match for your Family Office is not a straightforward process. Given the small size and scale of operation, Family Offices often lack the infrastructure, time or knowledge to recruit staff. Agreus provides tailored and dedicated services to our Family Office clients. We have become an established global presence in the United Kingdom, Europe, United States of America, Asia-Pacific and the Middle East. We have nearly 13 years of primary data on Family Offices, including their demographics, governance structure and compensation packages. We are well-informed about the market and will be able to provide guidance on market trends such as compensation benchmarking, desirable skill sets and employee expectations to our Family Office clients. For a more tailored conversation about hiring for your Family Office, please do not hesitate to get in touch.