These two questions, how many are there and the total amount of assets they manage, constantly come up in the world of single-family offices and invariably lead to different estimates – they are always estimates – about the sector.
So, Family Capital has decided to look into the issue afresh, and get some idea of the size of the single-family office sector. We asked a number of specialists in the area to give their views. And we also give our own view on the size of the market.
Out of all the groups, Family Office Exchange (FOX) gave the most detailed idea of the number of single-family offices – or, at least they did for the US. In an analysis they did a few years ago, FOX reckons there are around 6,000 single-family offices in the US. They base that on the 7,000-plus individuals and families in the US who have wealth of between $150 million and $250 million, and the 3,000 who have wealth of $250 million and above.
…that would put the worldwide number at around 9,000…
FOX reckons there is a 50% likelihood that those with wealth in the first band ($150 million to $250 million) will have a family office, and a 75% likelihood of those with assets of $250 million and above. That gives a figure of 6,000 just in the US. Given there must be at least another 3,000 single family offices, if the FOX calculation is used, in the rest of the world that would put the worldwide number at around 9,000. That’s a big number.
Bloomberg, which monitors the fortunes of the world’s wealthiest and is one of the biggest collectors of data on the finance sector, don’t report a number. They don’t think the data is reliable enough. And one of their wealth reports told Family Capital that a big problem with defining the size of the market is agreeing on what actually is a family office in the first place, with many definitions being vague.
Angelo Robles, founder and chairman of the US-based Family Office Association, reckons there “may be globally between 4,000 to 5,000” single-family offices. And adds: “The number of families that could have a single-family office is much, much more.” So, the market is growing rapidly.
To get an idea of what Family Capital estimates are, it might be helpful to define what is a single-family office in a little more detail. To begin with, a single-family office can be defined as just managing the money of one family, or at least an extended family, but with no commercial interest to grow its assets by bringing in outside money. But within this definition, a closed multi-family office should also be included, as these family offices aren’t commercial and are closed to outside investors.
Embedded family offices, investment groups linked to an operational business, should also be excluded because getting any idea of the size of this market is virtually impossible. And on this basis, those family offices that employ less than five people should probably be excluded as well. Those with less than five individuals are likely to be a very informal grouping. These groups might employ staff on an ad-hoc basis – and they might do other things as well as work for the family. So, for the sake of the argument, very small family offices are excluded from Family Capital’s definition.
Given this, a conservative estimate of their total levels of assets under management comes in at $1.2 trillion
Family Capital has a database of just over 1,000 single-family offices that fit into the definition described above – bonafide single or closed-multi-family offices that employ five or more staff. Family Capital reckons there are at least another 2,000 of these offices across the world, but not many more than that.
That gives a total number of around 3,000 single-family offices globally. That is still a big number, but less than many others think. And, of course, the differing views on their numbers are no less legitimate than Family Capital’s – the differences probably stems from the definition.
So, if there are 3,000 single family offices globally, what are their total levels of assets under management? Very informally, Family Capital reckons each family office in its definition would have an average portfolio worth $400 million – of course, many have much more, but some have much less. Given this, a conservative estimate of their total levels of assets under management comes in at $1.2 trillion.
Of course, this is no more than an estimate, and no one will really know the true number until the sector is regulated, and that is likely to be years away, if at all. In the meantime, Family Capital would encourage its readers to give their views on the subject. The more information we have on the sector, the better those estimates will be.