Family Office

External CIO Industry: Growing Assets And Large Divergences

Harriet Davies, Editor - Family Wealth Report, 10 May 2012

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External CIO firms clocked up asset growth of 5.5 per cent on average last year, according to a study from The Family Wealth Alliance, but with growth varying wildly between firms.

External CIO firms clocked up asset growth of 5.5 per cent on average last year, according to a study from The Family Wealth Alliance, but with growth varying wildly between firms.

A total of 50 companies took part in the External CIO Study, representing taxable assets under advisement of $551.1 billion at year-end 2011. The Family Wealth Alliance said this represents around 35 per cent of taxable assets in the CIO industry, which it estimates at being worth around $1.5 trillion in terms of client assets – with around half of these from single-family offices and half from private families investing directly.

The study, unveiled yesterday at the Alliance’s Annual Spring Event in Oak Brook, IL, found that the growth rate of assets at individual firms ranged from a decline of 11.4 per cent to an increase of 139 per cent. What’s more, there appeared to be a divergence between growth registered at companies labeling themselves as “investment firms” and “multi-family offices,” with assets at the former type expanding by 6.8 per cent compared to 1 per cent on average for the latter.

In the study group, 58 per cent of participants were investment firms – made up of investment consultants, managers of managers, or separate account managers – while 42 per cent were multi-family offices.  

But in a competitive marketplace for private client wallet share the biggest challenge external CIO firms face is awareness about the business model, says The Family Wealth Alliance, as many in the wealth management industry remain in the dark about the exact nature of the offering.

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