As technology continues to tie the world together in an interlacing web of direct and indirect connections, the globalization of family offices follows suit and is on the rise.
North America does not have the corner on family offices. Research shows that there are just as many in Europe as there are in the United States, and other markets, such as Asia and Africa are expanding as well. In fact, trade in the “South-South flow,” between China and Africa is quickly increasing. Old wealth in Europe continues, while new wealth in Russia is burgeoning following the demise of communism. The Swiss have seen a substantial rise in family offices after the banking restructuring they experienced about 10 years ago. The trend in multiple jurisdictions will continue.
While using a family office is the vehicle of choice of High -Net-Worth Individuals (UHWI) to protect assets, using hedge funds is quickly declining. Many hedge funds are being turned into family offices and former bankers are finding their calling managing these new family offices. More volatile market conditions are causing family offices to focus on non-traditional assets such as private equity and real estate, regardless of where they are located across the globe; mostly because trade, assets and funds are flowing between all sorts of countries and families, tying more economies tightly together. As an example, the volume of trade between China and Africa rose to $211 billion in 2012 and is only expected to continue increasing.
Of the estimated 10,000 single family offices worldwide, half of them are 15 years old, or less. 35% of all family offices were formed after 2010, the majority for first and second-generation investors, this pointing to new money and new generations on the playing field. For these family offices, where they’re investing their money is changing. The latest trend is in global sustainability and impact investing, which tends to mirror the concerns of the Millennial generation, regardless of the country they are in.
Back to how technology is impacting global family offices: due to the rise of technology, tech-savvy offices can expand globally and leverage local talent. Principals, managers and investors can work from home-offices or work remotely, from other countries or on a yacht or on a plane. Ultra-High Net Worth clients are pooling in Switzerland, Hong Kong, China, Japan, Germany, Canada and France. This underlines the need to be diversified and global savvy.
While family offices are on the rise in top areas like: the Middle East, Southeast Asia and Africa, all countries have issues that investors need to deal with and understand. These questions should get you thinking about the globalization of your portfolio: will you be required to use locals to handle the trust? Will you be required to hold annual meetings locally? Will you have “boots on the ground” in another country? What are the time zone differences, and will that be a factor? What are the tax laws there? Is the banking system stable? How protective are the trusts?
If you want to be well-represented in the new global climate, now is the time to make that happen. For balanced investment strategy, growth and preservation, contact us at Paradyme.
