In the European business world, single family offices have become more known in recent years. SFOs are playing an increasingly important role in investments and transactions in the European and wordlwide economy. As the leading research provider in the Single Family Office sector, familyofficehub has deep knowledge about that sphere. Our database of the largest European single family offices comprises over 400 entries and covers many countries and sectors. But the question arises: what are single family offices anyway? Our definition: Single Family Offices are the investment companies and advisory services of wealthy families or HNWIs. For these, they take over investment management, asset controlling and reporting as well as other related activities. The highest priority is to maintain value and increase assets. Single family offices are available in various sizes: some SFOs employ hundreds of investment professionals and are large professional investors, while others consist of only a few employees and specialise in specific areas.
What are the tasks of Single Family Offices?
As already stated, we define single family offices as the investment companies of the HNWI families. SFOs exist to preserve the assets of families, increase them over generations, and make steady dividends to the family members. Accordingly, one of the main areas of responsibility is investment management. This includes establishing an investment focus and investing according to this focus. This can take many different forms. Subsequently, the investments must be controlled and be risk-managed. Also important are related tasks such as the consideration of tax aspects or the preparation of regular reports. Some Single Family Offices also provide secretarial services for family members: booking flights, buying gifts, organising appointments. Foundation work and Charity or Pro Bono investing are also central components of the work of some Single Family Offices. For example, the Family Office of the Jacobs family distributes all its profits to the charitable family foundation.
What do Single Family Offices invest in?
As already mentioned, Single Family Offices are active in various areas. Family investment companies are often built around a family business. For example, the family’s assets may be pooled in a holding company, which in turn manages the family businesses. The profits from the group of companies are then distributed to the family members. However, many Single Family Offices are also pure investment companies. The basis of their assets is often a large portfolio of financial products such as shares, funds and bonds. Real estate is also very popular with Single Family Offices: secure steady dividends and the assets invested are more stable than in shares, for example. Recently, SFOs have increasingly focused on alternative asset classes: private equity, venture capital and investments in renewable energies. The role of family offices is very different here. Some have their own investment teams in the field or specialise only in private equity, while others rely mainly on external managers. Some SFOs are also involved in the arts or invest in agricultural and forestry land.
Reasons to set up a Single Family Office
- The basic prerequisite for setting up a Single Family Office is the existence of considerable assets. There are some basic reasons that often lead to the establishment of family offices:
- Sale of a business: The family business is sold, the money must now be invested.
- Professionalization: Through the own company or the own activity considerable liquid funds are available which must be invested. By founding the Single Family Office, the investments are organized and professionalized.
- Generation change: The previous generation leaves the family business, the assets are to be handed over to future generations in an orderly manner.
- Property ownership: The family owns considerable land. The establishment of the SFO professionalises, monetises and expands the portfolio.
What is the minimum amount of assets under management of a SFO?
The sizes of Single Family Offices vary. Large investment companies with several employed investment professionals only make sense with assets over 100M€ – otherwise the personnel costs eat up the possible return. In our opinion, however, even smaller investment companies can be counted as Single Family Offices. For example, if a family has outsourced its investments and now some family members take care of it in addition to their actual activities. The investment focus of these SFOs is usually somewhat more pointed. The smaller Single Family Offices are often specialists in a certain area, such as venture capital investments.
Picture source: Henrique Ferreira