Family offices, in-house investment and service firms of wealthy families, are expected to add over $2 trillion in assets by 2030. This growth is driven by two main factors: the concentration of wealth at the top of the pyramid and the changing preferences of the ultra-wealthy in managing their finances.
Wealth is growing rapidly among the top tier, thanks to technology and globalization creating winner-take-all markets. The number of Americans worth $30 million or more increased by 7.5% in 2023, while their fortunes reached $7.4 trillion. Additionally, the number of centimillionaires (worth $100 million or more) has more than doubled over the past 20 years.
To better represent their interests and long-term goals, the ultra-wealthy are opting to create single-family offices instead of relying on private banks or wealth management firms. Family offices provide more privacy, customization, and tailored programs for future generations. They offer a dedicated team available 24/7 to handle all aspects of their lives, not just investments.
The rise of family offices is transforming the wealth management industry. With projected assets surpassing hedge funds, family offices have become sought-after by venture capital firms, private equity interests, and private companies. Traditional wealth-management firms are launching new family office teams and poaching family office specialists to tap into this growing market.
North America is leading the family office revolution, with family office wealth expected to grow by 258% between 2019 and 2030. Family offices in North America are projected to account for about 40% of the world’s total, with their assets reaching $4 trillion by 2030. Asia-Pacific is also experiencing significant growth, with the number of family offices expected to increase from 2,290 to 3,200 by 2030.
As family offices expand in size and number, they are becoming more institutionalized. They are shifting their investment portfolios away from traditional stocks and bonds and towards alternative assets like private equity, venture capital, real estate, and private credit. Family offices now allocate 46% of their portfolio to alternative investments, with private equity being the largest category at 19%.
Private equity giants like Blackstone, KKR, and Carlyle are building out their private wealth teams to cater to family offices. Family offices are seen as valuable partners due to their long-term investment horizon and patient capital approach. They are also increasingly making direct investments in private companies, with 62% of family offices making at least six direct deals in the past year.
To support their growing assets and responsibilities, family offices are hiring more staff and increasing their reliance on outsourcing. Many family offices are also moving towards institutionalization, adopting professional management, governance, and technology. With the wealth transfer expected to shift trillions of dollars to spouses and the next generation, more women and inheritors will take on leadership roles in family offices.
In conclusion, family offices are experiencing explosive growth, driven by the concentration of wealth among the ultra-wealthy and their changing preferences in wealth management. They offer greater customization, privacy, and tailored programs for future generations. As family offices become more institutionalized, they are attracting attention from traditional wealth-management firms and private equity giants. The rise of family offices is reshaping the financial landscape and creating new opportunities for investment and collaboration.
