Italy has some of the world’s most famous family businesses, but when it comes to family offices it’s a different story, with very few of them being set up. That might be beginning to change.
Fiat, Salvatore Ferragamo, Luxottica, De Agostini are some of the best-known family businesses in the world and Italy could well be regarded as the spiritual home of family businesses in Europe given how much the sector has dominated the country’s economy for so long. But when it comes to family offices, the country has been slow to embrace them.
According to the Milan-based Associazione Italiana Family Officer (AIFO), there are around 60 family offices operating in Italy, and just 23 of those are single-family offices. This compares to the 100s of single-family offices that exist in Switzerland, Germany and the UK. The AIFO says a big reason for the slow pace of development is because families historically have set up informal offices, often embedded within their family business.
“They (family business owners) relied mainly on the advice of specific experts, such as investment officers, tax and legal advisors and CFOs, to whom their family fortune was entrusted,” says Michela Guicciardi of the AIFO. “In some cases, these advisors held other responsibilities within the family business, managing specific areas of their fortunes rather than applying a more advanced interdisciplinary advisory model.”
Guicciardi adds the development of family offices also suffered because of a “low degree of delegation” between generations. With the older generation still exercising overall control of the family business and unwilling to explore new ways of managing the family wealth through setting up an investment office.
But that’s beginning to change. “Today, the values, family relationships, and fortunes of Italian wealthy families have moved into a highly complex environment where these fortunes are becoming increasingly diversified,” says Guicciardi.
“Diversification and complexity, in fact, lead to more intricate monitoring and control processes, risk management and a higher demand for protection, which can only be fulfilled by applying an integrated global advisory model. This explains why these families and their advisors are now cooperating in establishing new structures to protect and govern their investments and assets.”
Structures around holding companies often operate as a de facto family/investment office structure in Italy. Two examples of these are Edizione, the investment holding group of the Benetton family, and COFIDE, the investment holding group of the De Benedetti family.
When it comes to investing, the local family offices appear to like property and private equity, says the AIFO. The average family office portfolio (both MFO and SFO) invests around 45% into property, another 17% in liquid assets, and 36% into family businesses, or private companies, according to AIFO numbers. One interesting new trend the AIFO found among the investment intentions of family offices was the desire to do more co-investing with other family offices.
“Italian families are turning to private equity and club deals and disinvesting from hedge funds,” says the AIFO. They are also allocating more of their assets into to the growing “startup ecosystem”. Impact investing is also on the rise.