Family offices could overtake hedge funds, with $5.4 trillion by 2030

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Family offices are expected to add more than $2 trillion in assets by 2030, as rising wealth concentration and a revolution in wealth management fuel rapid growth of new family offices.

According to a report from Deloitte PrivateTheir wealth is expected to grow even faster, reaching $5.4 trillion by 2030, up from $3.1 trillion today and doubling since 2019.

The total wealth of families with family offices is expected to reach $9.5 trillion by 2030 – doubling this decade, according to the report.

“The growth has been explosive,” said Rebecca Gooch, global head of insights at Deloitte Private. “The past decade has really seen an acceleration in the growth of family offices.”

The rise of family offices is reshaping the asset management industry and creating a powerful new force in the financial landscape. Predicted to have more assets than hedge funds in the coming years, family offices have become the new stars of fundraising, with venture capital firms, private equity firms and private companies all vying for a slice of their growing wealth.

This growth is driven by two larger economic forces. Wealth is growing fastest at the top of the pyramid, as technology and globalization create winner-take-all markets and big rewards for tech entrepreneurs. The number of Americans worth $30 million or more is expected to rise 7.5% by 2023, to 90,700, while their wealth will soar to $7.4 trillion, according to CapGemini.

The population of $100 million-plus individuals — those with $100 million or more in assets — has doubled in the past 20 years to more than 28,000, according to Henley & Partners and New World Wealth. There are now an estimated 2,700 billionaires in the world, 2.5 times more than the number in 2010, according to Forbes.

At the same time, the ultra-wealthy are changing the way they manage their investments and financial lives. Rather than entrusting their wealth to a private bank or wealth management firm, today’s ultra-wealthy are choosing to set up individual family offices to better represent their interests and long-term goals. Family offices are seen as offering more privacy, more customization, and better tailored programs for the next generation of the family.

“They want a dedicated team to serve them, 24 hours a day,” Gooch said. “Not just in investing, but in every different area of ​​life.”

After the financial crisis, wealthy families also wanted advisors who represented the family’s best interests, rather than wealth management advisors or private bankers driven by the need to sell products.

“There are some organizations that don’t have a product to show, but a lot of organizations do have a product,” said Eric Johnson, Deloitte’s head of private wealth management and family office tax. “And all of a sudden, if you hire them, what you’re going to have to buy is what they’re selling, which may not be the best thing for the family.”

According to Deloitte, more than two-thirds of family offices have been established since 2000. The largest number (41%) were established by the original wealth creators, while 30% served the second generation (heirs) and 19% served the third generation.

North America is leading the family office revolution. Family office assets in North America are expected to grow by 258% between 2019 and 2030, compared to 208% in the Asia-Pacific region. North America’s 3,180 individual family offices are expected to grow to 4,190 by 2030, accounting for about 40% of the world’s total. Asia-Pacific currently has about 2,290 family offices, which is expected to grow to 3,200 by 2030.

The total wealth of families with family offices in North America has doubled since 2019 to $2.4 trillion. That figure is expected to reach $4 trillion by 2030, according to Deloitte.

The $5 trillion in global capital has sparked a rush on Wall Street to help family offices manage their money. From Goldman Sachs and Morgan Stanley to UBS, JP Morgan Private Bank, Citi Private Bank and countless trust companies and multifamily offices, traditional asset management firms are poaching family office professionals and creating new family office teams to better target growth.

Accounting firms, tax attorneys, consulting firms and tech companies are also waking up. The power of family officesIt is now easy to outsource certain parts of your business to reduce costs.

“There’s a whole new group of companies that are benefiting from this ecosystem,” Gooch said.

As they expand in both size and number, family offices are also becoming more institutionalized. Instead of two- or three-person shops focused on basic portfolios and arranging family travel, today’s family offices are more like boutique investment firmAccording to Deloitte, the average family office has 15 employees managing $2 billion.

Family offices are also changing the way they invest. Instead of the old 60-40 portfolio of stocks and bonds, family offices are shifting their money to alternative assetsincluding private equity, venture capital, real estate and private credit.

According to the JP Morgan Private Bank Global Family Office Report, family offices now have 46% of their total portfolios in alternative investments. The largest portion is private equity, at 19%. In addition to investing in private equity funds, many family offices are making direct deals, in which they direct investment in a private company.

A survey by BNY Mellon Wealth Management found that 62% of family offices made at least six direct investments last year and 71% plan to make the same number of direct deals this year.

Private equity giants like Blackstone, KKR and Carlyle are building out their private wealth management teams to better target family offices. Private equity dealmakers are also exploring family offices, which can buy stakes or entire companies. Because family offices take a long-term view, preferring to invest for decades or even generations, they are considered more “patient capital” than private equity or venture capital firms.

“Family offices can be very solid and strong partners to invest in,” Gooch said. “I think a lot of private equity firms are very grateful for their long-term patient capital and their commitment to the sector.”

To support their growing assets and liabilities, family offices are on a hiring spree. According to Deloitte, as many as 40% of family offices plan to add staff this year. More than a third (36%) said they plan to increase the number of services they provide to families or increase the number of family members they serve. Deloitte noted that more than a third (34%) are also increasing their reliance on outsourcing.

Deloitte says the biggest trend for family offices in the coming years will be a continued move toward “institutionalization” — with more professional management, governance, and technology. More than a quarter of family offices now have multiple “branches” to serve different parts of the family, often in other countries.

And with Large Asset Transfers With trillions of dollars expected to be passed on to spouses and the next generation, more women and heirs will begin running family offices in the coming years. The average age of family office directors in the Deloitte survey was 68, and four in 10 family offices will go through a succession process in the next decade.

While women make up just 10% of those with assets worth $100 million or more, they control 15% of the world’s family offices, according to the survey.

“Women are more likely to be the head of a family office than men,” Gooch said. “A family office can really focus on important life stages, like retirement or estate planning. And making sure the next generation is prepared.”