Family Offices Are Billionaires’ Secret To ‘Riding Out 2020’s Storm’

Single family offices, the financial companies set up to control the assets of the world’s very richest, have made good money during the coronavirus pandemic.

More than three quarters (76%) of single family offices said that their portfolios performed in line with or above expectations so far this year, according to the Global Family Office Report from UBS.

Only 13% of them lost money during the worst weeks of the coronavirus pandemic, and most have already clawed back those losses. Some family offices actually borrowed money between March and May to take advantage of cheaper deals, according to UBS, a Swiss bank.

Buoyed by the pandemic, Josef Stadler, head of Global Family Office at UBS Global Wealth Management says “we expect to see big moves in the coming months.” Equities and real estate is where their money is expected to go next, according to the report. Nearly half (45%) said they would buy more gold.

It is normally only the very richest who own a single family offices. Costs vary, but most advisers say you need at least $100 million to set one up. Most of their owners are billionaires.

In its report, UBS surveyed 120, which, between them, look after $142.4 billion. However, in a report last year, Campden Research estimated there were 1,700 of them around the world, with most in the U.S. followed by Europe, though Asia is catching up fast.

A single family office can range from a small outfit of half a dozen staff delegating money management to others. Larger ones resemble a personal bank, with tens or hundreds of staff involved in multi-billion dollar deals worldwide.

These larger single family offices have “institutional-like profiles” says Stadler. Their investment processes resemble big banks and they “embrace and manage risk like no other investor.”

Earlier in July, billionaire John Paulson said he was closing his hedge fund, John Paulson & Co., and in effect turning it into one of the world’s largest single family offices. With over 100 employees it will now only manage Paulson’s personal wealth, estimated by Forbes at $4.2 billion.

With growing financial clout, single family offices are starting to make merger and acquisition deals worthy of investment banks. These “club deals” are often brokered between several family offices pooling their money together.

On the other hand, single family offices can be swallowed up by their larger rivals: Multi family offices. In April, when stock markets were at their worst, Stonehage Fleming, Europe’s largest multi family office, bought Cavendish Asset Management, the family office of the Lewis family.

But the worst of the coronavirus pandemic might not be over yet and many family offices are hurriedly re-balancing their asset allocations to manage long-term risk, says the Global Family Office Report.

No doubt these will be points of discussion at the 11th Global Family Office Investment Summit due to take place in Monaco on 28 July. It was billed as a $4.5 trillion meeting of wealth, but that number may now be larger.