From overlooked to unavoidable
Traditionally overlooked, family offices are now recognised for their substantial contributions, with an estimated 10,000 managing trillions in wealth. According to the UBS Global Family Office Report 2023, one strong sign coming from them is their plans to make the largest strategic asset allocation shift in years, due to changes in interest rates, inflation, and economic growth.
Family offices were reluctant to invest in venture for a while. In many European countries, they allocate a surprisingly small portion to venture investments. In Switzerland, for example, only 2% of their assets go to PE funds, the same amount allocated to arts and antiques.
Another factor influencing progress might be that many family offices make the mistake of trying to minimise venture capital risks in ways that contravene its inherent high-risk, high-reward nature. They act as tourists in venture capital, entering the market in upswings and quickly exiting after facing losses. According to Ertan Can, founder of Multiple Capital, this cyclical participation can lead to missed opportunities.
The turn
However, things are slowly changing. After the tech reset in the European fundraising market, companies staying private for longer, and venture becoming one of the best-performing asset classes, their interest in the asset class has increased. Family offices are becoming active LPs in the European venture ecosystem and the backbone of global economies, according to Sonia Tatar.
Additionally, we see more family offices becoming VCs, or actively considering it for their portfolios. Alexander Getty, of Getty Family Offices, is just one of the family offices that confirmed this recently.
Impact and the values alignment
Family offices are increasingly aligned with positive impact investing and are prioritising sustainability in their allocations. However, they currently account for just 4% of the impact investing ecosystem.
We write about impact investing because it aligns perfectly with the values and goals of many family offices. They often seek to leave a positive mark on the world alongside achieving financial returns, and impact investing allows them to strategically allocate their wealth towards initiatives that generate measurable social and environmental benefits alongside financial gains.
When we discuss impact, diversity naturally follows
According to KPMG's 2023 Global Family Office Compensation Benchmark Report, only 21% of family office professionals are women.
Times are changing, and as more women become wealth holders in the family, we have more professionals active in this sector. According to Mishcon de Reya, 60% of the UK's wealth is expected to belong to women by 2025.
First appeared in our newsletter, July 2024.