Family offices have played a pivotal role in the alternative investment industry for quite some time - though in the last decade especially, we have seen these groups reaching new heights. As the number of these groups continue to broaden, so do their investment patterns and overall prominence in the private markets. To keep you informed on the private wealth space, FINTRX has put together a list of developing trends that are expected to make a lasting impact on family offices over the coming years.
First emerging in the United States, family office growth has accelerated worldwide - with an estimated 10,000 family offices in existence today and rising. Largely attributed to advanced technical solutions and global market disruptions, it is easy to see why this transformation arose initially. Those in the family office arena are being challenged to reassess (and strengthen) their governance structures using identified objectives set forth by the family itself. This shift in turn brought new trends to the alternative wealth landscape, thus generating a multitude of new challenges and suitable opportunities.
The global family office landscape is in the midst of a profound transformation brought upon by a new generation of investors, whose attitudes and expectations have been shaped by modern advances, volatile markets and unforeseen global realities. In an effort to keep you abreast of industry trends, we have identified five trends developing within the family office landscape:
1. Seeking new ways to invest and manage family capital (continuous operational improvement)
In recent years, family offices have reached a new level of agility and sophistication, making them a viable option for protecting and preserving vast amounts of family wealth. Changing demographics, technological shifts and volatility in our current market environment have all impacted the way in which family offices invest and manage wealth. Because family offices often span across several generations, younger generations are bringing a new attitude to their investment approaches, as they are increasingly realizing traditional investment choices are no longer suitable to fit their needs. In search for predictable rates of return, family offices have begun focusing on non-traditional asset classes, such as private equity and real estate.
2. Desire to deploy capital with greater coherence to family values (preserve the family legacy)
Within the modern family office structure, the values on which the family is based play an integral role in how wealth is dispersed. Wealthy families have taken a more hands-on approach to asset management, oftentimes overseeing most, if not all actions taken. Because these highly tailored groups typically reflect the characteristics and goals of the family (or families) it serves, there are greater opportunities to preserve the family legacy.
3. Greater diversity in their investment allocations (into emerging markets)
Family offices have always been opportunistic by nature, but now this is being taken to a whole new level. As family offices continue to increase transparency, it has become evident that these groups are highly interested in alternatives investments - an advantage for hedge fund managers, venture capitalists and the like. This has led to a greater emphasis on diversifying investment allocations into emerging markets - such as blockchain or cannabis, for instance.
4. Increased allocation to direct investments in private companies (more direct deals)
As family offices continue to emerge into viable wealth solutions, their growing trend of making direct investments shows no sign of slowing down. Family offices generally turn to direct investments to take advantage of the many benefits offered, such as having greater control over their investments or bypassing layers of fees charged by intermediaries. At FINTRX, we continue to see an increased exposure to direct deals amongst family offices and their alternative portfolios. With an increased number of first-generation family offices entering the space, they are often less removed from entrepreneurial experience. This direct exposure to creating and growing successful businesses has since led to the family office space being more adept in making smart investments. Because of this increased sophistication, many have been able to adopt in-house, the services (and advantages) of traditional private equity funds. The deep-rooted domain knowledge of these entities leads to higher quality investments and increased deal flow.
5. Advances in technology have significantly transformed the ability to foster relationships with family offices
Advanced technological shifts have drastically contributed to the evolution of family offices, ultimately transforming the way in which we view and interact with them. Family offices are early adopters of innovative technology, leveraging complex tools such as Artificial Intelligence (AI) to enhance engagement and transparency. This is good news for those looking to raise capital, as it provides more opportunities to find and engage with investors on a humanized level. Fortunately, data solutions such as FINTRX make it possible for users to discover unique similarities that drive stronger results. Designed with AI to humanize your outreach, FINTRX Affinity delivers custom conversation starters, actionable insight on your best path to connect, and valuable intel on shared commonalities across 11,800+ family office decision makers worldwide.
- Evaluate the subtle nuances between each family office to find the most suitable fit.
- Find and Use shared commonalities to drive effective family office
- Discover unique similarities that in turn drive stronger conversation starters
As many asset raising professionals continue to try to engage with these private entities, it is important to recognize how these changing conditions affect your outreach efforts. With this in mind, we have developed our latest literature around Targeting Family Offices: A Consultative Prospecting Methodology. We hope you read it for yourself, share with a colleague, or use it as a tool for your team to refine your outreach strategies.
In this, you will takeaway:
- Best practices for finding commonalities to humanize your outreach
- Prospecting strategies derived from our industry insights and keen intimacy with the family office landscape
- Tips to leveraging the history of family offices to find your 'best path in' and perfect a consultative approach to foster suitable connections
Like anything in life, you must adapt to the changing conditions around you. This need for adaptation is ever-present in the private wealth markets, especially as global wealth reaches new heights. While these evolving themes continue to shape the industry, FINTRX remains steady in providing you with credible intel to optimize your engagement with family office investors.
The utilization of our family office data and research platform has opened doors to the many investment trends that shape our global economy. Engineered to help our clients identify and access family office capital in an intuitive and efficient manner, FINTRX offers accurate family office research, built with a bottom-up approach.