Family offices are the new power players on Wall Street.
A
growing number of wealthy Americans are launching family offices, firms
that do everything from investing money for the superrich to managing
their personal affairs. They are huge and secretive, and their influence
on Wall Street and Main Street is only growing.
Families
with these offices recently oversaw about $5.5 trillion in wealth, a
67% jump from five years ago, according to Deloitte. The firm expects
that figure to rise to $6.9 trillion this year and top $9 trillion by
2030. It estimates that in coming years, these offices will manage more
money than hedge-fund firms.
Banks
and other firms are hungry to cater to family offices’ every need,
while entrepreneurs and investment managers are clamoring to land a
slice of these families’ immense wealth.
“It’s not just growing, it’s exploding,” said Hendrik Jordaan,
a partner at Nelson Mullins who works exclusively with family offices.
“I really think about the family office world being the next private
equity.”
Launching a family office is in vogue. While the biggest ones have long managed billions of dollars on behalf of titans such as Jeff Bezos, Michael Dell and Bill Gates,
many families with hundreds or tens of millions of dollars in wealth
are launching them, too, or turning to so-called multifamily offices to
manage their fortunes. There are more than 8,000 single-family offices
globally today, up roughly a third from 6,130 in 2019, according to
Deloitte. The firm expects that figure to top 10,000 by 2030.
“It’s kind of become the word for ultrahigh-net-worth families. Do you or don’t you have a family office?” said Justin Flach, managing director of wealth strategy for Ascent Private Capital Management at U.S. Bank, who typically works with families with net worths topping $75 million.
“There’s some status assigned to that. You’re at a cocktail party talking about it,” Flach said.
How
the superrich deploy their firepower has vast implications for the
fortunes of businesses in almost every U.S. industry, global
philanthropy and the broader economy. As this money trickles through the
economy, it stands to transform the fate of businesses tied to
everything from artificial intelligence and data centers to dental
offices and medical spas.
Given
the sums they can invest, big family offices can sometimes compete
against large institutional investors on deals, putting them up against
behemoths such as Apollo Global Management and Blackstone.
Family
offices can find their way into public-company merger deals, too. The
offices of late Pequot Capital founder Arthur Samberg and Addison
Fischer are among the backers of fusion-energy company TAE Technologies,
which struck a deal this month valued at $6 billion to merge with Trump Media and Technology Group.
Unlike
public pension-fund managers, who answer to local teachers and
firefighters, or hedge-fund firms, which regularly provide financials to
investors, family-office leaders don’t answer to anyone but themselves.
That gives them vast latitude to hold investments for decades and ride
out periods of stomach-churning volatility, or make large and
concentrated wagers. Traders and advisers say that family offices often
have little interest in hedging their bets through tools such as
derivatives....
