Invesco Study Shows UHNW Clients In Middle East Far Prefer Single Family Offices To MFOs

Tom Burroughes

24 May 2013

Ultra high net worth individuals living in the Gulf Co-operation Council jurisdictions of the Middle East are far more likely to use a single family office rather than a multi-family office because they want to keep a tight control over their affairs, according to a study by Invesco.

The GCC jurisdictions are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

(While the Invesco report focuses on the Middle East region, the different ways in which single- and multi-family office models are viewed may have parallels in other markets to some extent. Readers in Asia may find the results interesting as the Asian family office market, while growing, is still relatively young compared with that of say, the US or Europe.)

The report said there is “strong evidence” to suggest that single family offices are preferred to multi-family offices in the region and that SFOs dominate MFOs in terms of firm numbers and assets under advice.

“Our findings suggest that the primary challenge for MFOs is the importance placed on control, trust and confidentiality by UHNW clients in the GCC,” the report, entitled Invesco Middle East Asset Management Study, said.

“This has forced MFOs,” it continued, “to participate behind SFOs in the value chain and compete more directly with international private banks on investment services. However, MFOs are losing out in both parts of the chain: a light-touch SFO model run by a trusted employee is better placed than the MFO to offer control and confidentiality while international private banks servicing a global UHNW customer base are better placed to offer scalable execution services.”

Some 54 per cent of SFOs cited investments – often mergers and acquisitions linked to a family business as key services – while 46 per cent cited procurement and 31 per cent cited relationship management as important services. By contrast, most MFOs focus on personal advisory services, with 83 per cent citing fund selection and 67 per cent citing asset allocation as vital services.

Compared to the previous report in 2012, the study said the largest year-on-year change has been the cut in capital flow from personal to corporate assets. Last year, family offices in total forecast a big move to corporate assets, but this year there was no trend in either direction, suggesting the requirement for funding by corporates has slowed significantly, the report said.

From an investment point of view, time horizons for family offices have lengthened, from fewer than three years in 2011 to almost five years in 2013, which matches the greater autonomy of UHNW personal assets over recent years, the report said.

The rest of the report examines trends in areas such as sovereign wealth funds, state pension portfolios and capital flows between the GCC region and other parts of the world.