Estimates place the total assets managed by wealth managers to be around $20 trillion. That’s an awful amount of money – more than the annual output of the US economy. But how much do single-family offices manage? A lot and it’s growing rapidly.
Of course there’s no way of knowing with any exactness how much single-family offices do manage. How much wealth managers manage is easier to work out. They are commercial businesses and many publish data on assets under management, and with a bit of probing it’s possible to get the numbers from those that don’t. But that same logic doesn’t apply to single-family offices – they don’t publish how much they manage, nor can you get it from them, even if you ask very nicely.
But he’s a very rough estimate of how much single-family offices manage, based on how manage there are and how much each manages on average. Let’s say there are at least 5,000 single-family offices in the world and on average each one manages around $250 million. That means that between them they manage $1.2 trillion in assets. Add in family-controlled investment groups like Exor, Berkshire Hathaway, and Investor AB into the equation and the total will easily double to at least $2.4 trillion.
But that might only be the start of things, because many business owners see their company as a kind of a family office – the business is their investment, designed to ensure future generations income and security. If the net asset value of all these businesses were added to the total then it would far outstrip the money managed by the global wealth management industry.
For the purpose of clarity let’s just stick to the more conceivable estimate of $2.4 trillion, which represents slightly over a tenth of what is managed by the global wealth management sector. But the total for the wealth management sector is probably overstated, because a considerable amount of the money they manage is on the behalf of family offices. Strip this family office money out of the wealth managers’ total and the money managed by family offices is likely to be much closer to the wealth managers’ number.
And the significance of all this? Family offices manage a huge amount of money and are increasingly rivalling wealth managements as investors of that money. This trend will only continue.