Business

New York City is the world’s capital for family offices…but will it remain so?

With more family offices based there than any other place globally, New York City has an ecosystem for the sector like nowhere else. But can it remain number one in the family office world given the potential demise of big cities accelerated by the COVID-19 pandemic?

Of Family Capital’s database of more than 1,000 single-family/principal investment offices, 110 are based in New York City. That’s much more than any other city in the world. In the US, New York City has more than three times the number of family offices than its nearest two rivals, Los Angeles and Chicago. 

Globally, London and Singapore, the next two biggest cities for the number of family offices, with 31 each, are far behind New York City. 

Of course, our database underestimates the actual numbers of family offices in New York, which could be as many as three times more given the opaqueness inherent in the sector. But that’s true in all these centres for family office activity, so New York City’s importance at the top of the family office world is a true reflection of what’s happening in the real world.

The city’s dominance emanates from its historical importance as the birthplace of the first family offices. That historical relevance goes back to the first-ever family office, Rockefeller & Co/Rockefeller Family & Associates, which was famously run out of room 5600, a suite on the 56th floor of Rockefeller Center in midtown New York for most of the 20 century. 

Rockefeller Family & Associates morphed into a multi-family office in 1979, and today is Rockefeller Capital Management, but the business is still very much based in New York City. 

It wasn’t just the Rockefeller fortune that established New York City as a family office centre; other notable families like the Vanderbilts, with William AM Burden & Co, and the Kennedy family with Joseph P. Kennedy Enterprises set up family offices in the city. Both investment groups are probably the two oldest continuous running single-family offices globally – and remain based in the city.  

Old American industrial fortunes based their investment offices in America’s most populous city, and as these gave way to new fortunes made in finance, New York City’s centre for family office activity grew even more prominent. Pretty much all the big titans of the hedge fund and private equity world’s, at least in the US, set up their family offices in the city. 

As fortunes shifted in the late 20 century more towards Silicon Valley and tech in general, family/principal office activity grew in the West Coast of the US. But New York City didn’t lose out from this trend, with Michael Dell’s MSD Capital based in the city, and more recently, Adam Neumann of WeWork’s fame, setting up his investment office, 166 2nd Financial Services, in the city. 

Of course, over the many decades of family office activity in the city, New York developed a highly sophisticated workforce of advisors and investment specialists. These individuals weren’t just skilled in the latest financial, tax, and fiduciary thinking, but skilled in applying them to the assets of the wealthiest families in the world. 

But will New York City, or in fact, any of the big cities of family office activity, remain so prominent in the future? 

We all know the Covid pandemic accelerated the age of video-conferencing and remote working. These forces effectively are weakening the relationship between activity and location. 

This trend is causing something referred to by economists as “disagglomeration”, or when a city or region’s past spectacular success in attracting talent ends up losing its cost-savings appeal. So people leave and set up in other areas much less expensive.  

If this trend is accelerating in cities like New York and London, family offices might be the first to move away from the big city centres. After all, they are much more agile than big financial and corporate businesses based in these cities.

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