Holding companies are the real family offices

Many entrepreneurs and family business heads remain reluctant to set up family offices because their holding company effectively acts as one. That’s not likely to change in the future.

The Agnelli controlled holding company Exor might be the most obvious case of a holding company that works in many ways as a family office, but there are many other examples as well. Indeed, most family businesses in the Middle East and Asia are structured as holding companies that can easily invest in other businesses when opportunities arise.

Here’s just a few examples: the Yusuf Bin Ahmed Kanoo Group of Companies in the Gulf region acts as a big investment vehicle for the Kanoo family; Tata Sons Limited is the holding company for the Tata family and invests in a multitude of sectors; and Li Ka Shing’s Cheung Kong Holdings and Hutchison Whampoa have multiple investments in huge variety of sectors.  

These holding/investment groups aren’t just limited to emerging markets, many European family businesses have also set up similar structures in the absence of a fully functional family office. KB Holding is an investment vehicle and holding company for one of Germany’s richest men Heinz Hermann Thiele, who owns Knorr-Bremse Group, the world’s biggest maker of brake systems for trains and commercial vehicles. Sir Michael Bibby, the CEO of the UK-based Bibby Line Group, says he runs his business as a family office and sees no reason to set up a separate investment company. This would seem to be the sentiment of many other family business owners.

Of course, sometimes these individuals and/or families set up family offices. But they are viewed as places to park money. There is little professionalization of these family offices.

And, despite the huge growth in the number of family offices in the last 20 years, it’s seems unlikely that many family businesses will be setting up one in the future. Not least because many of them see their businesses as their investment vehicle.