What is the difference between single family offices and foundations?

What is the difference between single family offices and foundations?

At first glance, foundations and single family offices sound relatively similar: both often manage considerable assets and want to hold these assets. However, the purpose of the investments and the investment motivation are very different: Foundations exist for the common good and invest in projects that improve it. Although (in most cases) the foundation’s assets are to be held for the long term, in the case of single family offices, growth also plays an important role. For family offices, the focus is largely on maintenance and growth, not philanthropy. This article is based on the unique List of the 200 most important single family offices in Germany.

  • Excel list of the 200 most important single family offices in Germany
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How do foundations and single family offices work?

In the case of foundations, a distinction is made between grant-making foundations and operational foundations: Grant foundations invest and support existing projects, while operational foundations initiate, support and carry out their own projects. There are also hybrid forms. There are also differences in family offices – some single family offices invest in existing funds, medium-sized companies or finance existing projects, such as real estate projects, while others develop their own investment strategies and opportunities. In some cases, single family offices open these new investment strategies to other investors.

How flexible can foundations and Single Family Offices work?

Just like Single Family Offices, foundations can have different legal forms: when a foundation is set up, a distinction is made between a foundation with legal capacity and a fiduciary foundation. A trust foundation has the advantage that it is legally independent and can therefore operate very flexibly. Nevertheless, there is a big difference between the management of a foundation or a single family office: Every foundation has a foundation purpose, i.e. a certain guideline in what areas the foundation money may be invested. Many foundations also have a board of trustees, which decides which applications correspond to the foundation’s purpose and can be approved. An SFO, on the other hand, also has an investment direction and area, but a single family office can invest flexibly in other areas if required and desired.

Are single family offices and foundations therefore mutually exclusive?

In spite of the different purpose, a union of the two endeavours is not mutually exclusive. In the meantime, there are many (single) family offices which, in addition to their asset management, also have philanthropic ambitions and set up a foundation in addition to the family office, into which money from the family assets then flows.
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