If you’re a very wealthy family who decides to set up an investment group, which may also help with your fiduciary affairs and even your concierge services, why should you tell the world about it? Why should families risk any security and/or reputational issues that might come about be having a more public profile for a family office?
But some single-family offices are deciding to have a more public profile, despite no obvious commercial reasons to do so. They are launching publicly accessible websites and telling the world about their investments, their performance, and even sometimes more. They are the likes of Ferd, set up by Johan Andresen in Norway, MSD Capital, Michael Dell’s family office, Vulcan, Paul Allen’s investment group, and the Fremont Group, controlled by the Bechtel family. Even some family offices in emerging markets have websites disclosing a lot about them, like the AlTouq Group in Saudi Arabia, and Peninsula Participacoes in Brazil.
OK, for every family office telling the world about themselves there’s at least 20 or more that aren’t. Their names have only become known because of their investments – typically through Securities and Exchange Commission filings in the US, or similar regulatory disclosures in other countries.
Big names in this category are Bill Gates’s Cascade Investment, 1888 Management, set up by Charles and David Koch, and Weybourne Partners, which serves James Dyson and his family. There are many, many more that fit into this category, and indeed, some with not even a whisker of a public profile. These latter ones are normally based in offshore centres – and they may have a lot to hide.
Family Capital spoke to a few family offices about the transparency issue – here are a few responses – all rather fittingly, anonymous.
“One of the principal reasons why I am persuaded of the efficacy of the single-family office role is that, assuming that the single-family office has a sufficient critical mass, it benefits from a largely known and predictable workload that can be staffed efficiently and effectively,” says one London-based senior manager of a family office.
“Unlike a multi-family office or a professional firm, there is, therefore, no particular compulsion to gain new clients, such that there is no particular point to publicity or self-advertisement. My thinking on this is accordingly not particularly driven by considerations of physical security or cyber security. All our business is done essentially in countries where the rule of law is strong, such that physical security concerns are essentially a matter of the same common sense precautions that one would take in London.”
And asked about potential cyber security threats for family offices, he says: “Cyber security is a growing and ever-present risk, but this is a consequence of the increasing sophistication of the techniques being used by cyber-criminals, rather than any other factor.”
Another family office principal says: “We are fairly transparent as a family office, not only with a website but our accounts are available from the UK’s Companies House, and audited by one of the big four accountancy firms. Cyber security is an issue for all firms whether they are secretive or not.”
Whether family offices decide to have a public profile or not, the trend for more information coming out about them is here to stay. There’s a couple of reasons for this, one driven by the nature of their business, the other driven by wider developments in society.
As Family Capital has said on numerous occasions, family offices are more than ever taking strategic stakes in businesses. Many of these holdings are private, but some are listed – and this is leaving a fingerprint behind, which the public has access to. This is how people found out about Cascade and 1888 Management.
And at the same time that family offices are revealing more about themselves through their investments, they are also revealing more about themselves, albeit unwittingly, through social media and the web. Not just from LinkedIn profiles, but anywhere on the web – because it’s almost impossible these days not to have some information about one’s work activities on the web.
As one advisor recently told Family Capital, given these trends, maybe it’s better to have some profile, i.e. a website, rather than nothing at all. A completely secret approach could actually lead to greater suspicions, and ironically, more attention from the wrong people.
There’s also another benefit for family offices having more of a profile – being able to showcase the family’s commitment to social issues. Indeed, that might just be a big reason behind Vulcan and Ferd having such illuminating websites.