Family Offices: Optimising Operations and Opportunities

COVID-19 travel restrictions and stay-at-home orders forced many individuals to remote work and video conference solutions and use of the technology is now commonplace. Many new solutions have sprung up to keep people in touch, even remotely. This has created an expectation of instant face-to-face communication and electronic information at our fingertips, through remote databases or portals. As communication is a key value driver for the family offce, the offce should review their communication protocols to ensure they are remaining current with expectations.

Investment in operating companies remains popular, although there is a trend being led by newer family offces to invest directly rather than through a fund. A recent study by FINTRX (FINTRX 2020 Family Offce Industry Report) revealed 83% of single-family offces across the globe consider allocating directly, with much of the increase coming in the past five years. The study notes newer family offces are more likely to invest directly as their principals are less removed from entrepreneurial activities.

Wealthy individuals have always tended to invest in the industries where they accumulated their wealth, which certainly makes sense given their expertise in that area. As more entrepreneurs accumulate wealth from the technology industry, it is natural their family offces will invest in technology companies. As such, there is a current trend in family offce investing towards the technology sector. As with any non-traditional investment, a key to success is the family’s deal pipeline. The pipeline may include personal and business networks, as well as professional advisors. A poor pipeline may result in fewer quality opportunities, or the presentation of a deal after it has been rejected by many others.

The trend towards direct investment rather than through a fund presents complications for the family offce. Private equity and venture funds provide a layer of oversight and management that the family offce may need to replicate to monitor and support the investment if they directly invest. While many family members may become involved with the management of the investment, the family offce should review their staffng models to ensure they have the expertise and capacity required to support the investment as well.

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