Preqin, a specialist in alternatives data and insight, has recently published its "Fundraising from Family Offices: A guide to raising capital report."

The growth in the number of family offices – defined by Preqin as privately owned firms managing investments and trusts for one or more wealthy families – over the past five years highlights the structure’s increased popularity among wealthy individuals.

Family offices more than tripled between 2019 and 2023, from 1,285 to 4,592. Single-family offices, which manage investments for one family, hit 2,729 in 2023 or 59 per cent of the total, the report reveals.  

A high proportion of family offices globally have some exposure to alternatives. According to Preqin data, this stands at 57 per cent in North America, 69 per cent in Europe, 74 per cent in Asia, and 74 per cent across the rest of the world.  

“One phenomenon impacting both the creation of new family offices and their investment strategies is the great wealth transfer, which is expected to make Millennials the richest generation in American history,” Alex Murray, vice president, head of real assets, research insights at Preqin, said.

“An aging population means more family offices are transferred to the next generation – and this demographic shift is happening across the world. With this demographic change comes a shift in focus for family offices, from wealth creation to wealth retention,” he added.

North America remains the region with the greatest proportion of global private wealth, the report shows. The overall private wealth distribution when broken down shows that North America holds 33 per cent of global wealth, followed by Europe at 23 per cent, and APAC at 36 per cent, driven by China’s wealth. The number of family offices by region strays slightly from this distribution. North America is the location for 37 per cent of family offices, followed closely by Europe at 32 per cent, Asia at 15 per cent, and the rest of the world at 17 per cent, the report reveals.

The distribution of assets under management (AuM) for family offices is weighted toward North America, with this region attracting over half of total global AuM at 54 per cent, ahead of Europe at 30 per cent, Asia at 8 per cent, and the rest of the world at 8 per cent. 

Such reports add to a mass of studies showing that family offices are an increasingly prominent capital source, and keen on private markets as an asset class. The Preqin report also adds to a clutch of studies now being undertaken about family offices. This news service is exclusive media partner of Highworth Research, a firm tracking single-family offices around the world, including those in the US. To register for a trial, click here. Highworth has also rebutted certain claims that family offices have slashed venture capital exposures.

Emerging markets
There is the potential for greater growth in both the number of family offices and their capital across the world, particularly in some of the emerging markets, the firm said. While the number of family offices grew year-on-year to 2023 by 20 per cent in North America, 17 per cent in Europe, and 22 per cent in Asia, the rest of the world surged at 31 per cent. Although managers may tend to look toward developed markets for family office capital, the upward trend in emerging markets is noteworthy, the firm added.

A boost in Asian private wealth
Asia has also witnessed considerable growth in wealth concentration over the past half-century. In 2022, one third of China’s wealth was held by 1 per cent of its citizens, up 13 per cent since 2000. There is a similar story in Singapore where 1 per cent hold just under a third of the nation’s wealth – a 6 per cent increase in concentration since 2000, and in Hong Kong, where just over a third of the national wealth is held by 1 per cent of its citizens. Japan, however, has seen less growth in wealth consolidation with 1 per cent holding a lower 25 per cent of the country’s overall wealth, the report reveals.

Dubai
The story is slightly different for Dubai as a regional hub in the Middle East, the firm said. There is already a high concentration of wealth within the top 1 per cent. Like Singapore and Hong Kong, Dubai is known for its beneficial regulation and legal stability which makes it an attractive place for international family offices to relocate.

A further trend in this region is shaped by its gross domestic product (GDP) per capita being tied to oil, the firm added. The continued declining dominance of OPEC since the 1970s has reduced the per-capita GDP of the United Arab Emiratates and Saudi Arabia. This means that many family offices and investors in the region would benefit from diversifying against a commodity-driven portfolio by investing internationally across different asset classes, Preqin continued.

Allocations
Family offices are also looking beyond poorly performing asset classes, such as private equity and venture capital, toward other types of alternatives. Private debt grew from 8.3 per cent of family office fund searches in 2022 to 12.4 per cent in 2023, hedge funds from 5 per cent to 10.7 per cent, real estate from 13.2 per cent to 18.4 per cent, and infrastructure from 1.7 to 3.2 per cent, the report reveals. This demonstrates that family offices are seeking new sources of diversification and different return characteristics. However, most remain optimistic about a venture capital at 54.2 per cent and private equity at 52.9 per cent performance in the next 12 months, the firm said.
 

Editor’s note: The business of producing reports and surveys about family offices is becoming crowded, potentially leading to a law of diminishing returns in their impact. By our reckoning, the following reports have been issued: 

-- UBS Global family Office Report; 
-- Credit Suisse SFO Survey Report; 
-- BlackRock Global Family Office Survey; 
-- Citi Report – Direct Investment by Family Offices; 
-- Dentons Family Office Direct Investing Report; 
-- Goldman Sachs Family Office Survey; 
-- North America Family Office Report – RBC (& Camden); 
-- Morgan Stanley Single Family Office Best Practice; 
-- PwC Family Office Deals Study; 
-- The Global State of Family Offices – Cap Gemini;
-- KPMG/Agreus; and
-- Preqin (as reported above).