Wealth Surge and Family Office Expansion
In a groundbreaking report, consultancy firm Deloitte has projected that the wealth of ultra-rich families is set to balloon to an astonishing $9.5 trillion by 2030. The figure would mark a 73% jump from the current $5.5 trillion controlled by people represented by family offices, according to the report.
Deloitte’s report emphasizes the burgeoning number of family offices, which are expected to grow by one-third, reaching 10,720 firms by 2030. As wealth inequality becomes more pronounced, and the barriers to establishing a family office diminish, these entities are increasingly catching up with hedge funds in terms of size and influence. In some instances, they are even drawing from the same pool of professional investors.
Market influence and activism
Large family offices are making their mark on the market, not just as passive investors but as activist players. They are known for overthrowing corporate managers and advocating for significant changes within companies. The less stringent regulations governing these firms allow for investment behaviors that can have far-reaching impacts, as evidenced by the 2021 collapse of Bill Hwang’s Archegos Capital Management. Notably, Hwang was found guilty on criminal charges linked to this implosion in July.
Operational dynamics
The Deloitte report sheds light on the operational aspects of these family offices. On average, they employ just 15 individuals to manage $2 billion in assets. Interestingly, only about one-third are run by individuals outside the family circle.
Rebecca Gooch, Global Head of Insights for Deloitte Private, which serves closely held companies, cautioned, “It can definitely be risky managing that much wealth. Family offices need to be careful about who they bring on board.”
As family offices continue to expand and evolve, their role in the financial landscape is becoming increasingly significant. With projections indicating a substantial increase in their collective wealth, these entities are set to play a pivotal role in the global economy by 2030.