While the world’s richest individuals saw their assets decline in 2022, high-net-worth individuals in Latin America saw their assets grow by 2.1%, Marcus Baram reports this week. With this impressive growth, many family dynasties are setting up shop in Miami to have more access to the North American market and continuity with other family offices. Read on to learn more about how these families are approaching this move.
We also bring you a piece about how the Callan Family Office is targeting the fast-growing private equity market, as detailed by our new family office reporter, Andrew Cohen. Andrew is new to the beat, coming from a sports background, and is looking to expand his network within the family office space. If you’d like to reach out to Andrew to say hello, he can be reached at [email protected].
As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].
HANDPICKED: What you need to know to start a family office in Latin America
By MARCUS BARAM
When Argentina beat France in a nail-biting World Cup finale over a year ago, investment adviser Scott Sutherland remembers driving through a wealthy beachfront neighborhood in the Florida Keys and being struck by the sight of wealthy families celebrating the victory and waving the distinctive blue-and-white flags of Argentina. Some of them may have later become his clients.
“Florida and Miami, in particular, have become a money center, a destination for wealthy families from Latin America,” said Sutherland, who consults with ultra-high-net-worth people on setting up family offices.
Wealthy families in Latin America, whose patriarchs and matriarchs for a long time closely controlled their wealth, are increasingly setting up family offices and often setting up a satellite presence in the United States. They’re branching out due to the desire of next-gen family members for more investment opportunities and often to avoid the political instability of their home countries, say advisers who work with Latin American family offices.
DRIVING THE ECONOMY
While the world’s richest individuals saw their assets decline in 2022, high-net-worth individuals in Latin America saw their assets grow by 2.1%.
And it’s a region where family dynasties drive the economy, running 75% of companies valued at more than $1 billion. Yet at the same time, fewer family offices keep their money in the region, with their asset allocation in Latin America dropping by 2% in 2022. In fact, the number of Latin American family offices that allocate assets in North America is more than triple the number that do so in their home region, according to a UBS survey last year.
Recent headlines have highlighted this trend. They include the launch of White Bridge Capital in Miami via its strategic partnership with Agave Holdings — the family office of Mexico’s billionaire Beckman family, best known for its Jose Cuervo tequila brand. Some of the firm’s early deals reportedly included Mexican families investing in warehouses in Dallas and a Central American family plowing $70 million into multifamily developments in Texas and Florida.
Other Latin American family offices have been aggressive in venture capital — such as Chile’s Ibanez family, which co-founded Kayyak Ventures and invests both in the region and with Latin startup founders in the U.S. and Europe. Also, Mexico’s Coppel family co-founded Twelve Hundred VC, which focuses on tech investments.
STARTUP GROWTH
Family offices from the region are becoming incubators of startups, both in Latin America and the United States, said a family office in the region: “They see tons of opportunity here, especially in real estate and in private equity and private credit investments.”
For traditional families who might have a lot of wealth but didn’t have a proper family office, the trend is often led by next-gen members. “New generations are more into developing an office and hiring professionals, bringing that institutional framework to the family’s wealth,” said an investment adviser to such families. Such an approach, he said, also applies to newly wealthy individuals such as singers and performers from Colombia and Mexico, who are setting up family offices “because they like to control their destiny.”
STRADDLING CONTINENTS
Establishing a family office in Latin America can be complicated due to the regulatory and tax environment in many countries, which generally don’t offer tax incentives found in regions like Asia and the Middle East. Another challenge can be hiring the right people because of a shortage of skilled professionals — only around 9,200 in the region specialize in wealth management, according to a report by Wealth-X.
As a result, Latin American families will often have a dual family office structure — one back in their home country focused on the domestic market and an international one with a small team that relies on outsourced service providers and focuses more on investments, advisers say.
This can take the form of joining multi-family offices, where many essential services can be outsourced, said Guillermo Vernet, the founder and CEO of Kandor Global. Doing that in the U.S. or Europe can be attractive to these families for security reasons.
“They don’t want local people back home to know too much about what’s going on or about their wealth," Vernet said. "Here, they can have a separate staff and outsource other services, with more discretion.”
Abbas Hashmi, a financial adviser for global family offices, said the MFO model works well for such families because “it ticks all the boxes — you can bring in a Harvard grad or Goldman Sachs vet as your CIO, bring in someone in compliance from some major bank. You’ve got really great talent shared among three or four families.”
Given the political instability that has wracked countries like Argentina, Brazil and Colombia in recent decades, the U.S. can serve as a safe haven for them.
“Families are concerned, they’re seeing friction on a day-to-day basis in their home countries, and the U.S. has always been stable politically, though it can be a double-edged sword in terms of competition,” said a prominent investment adviser to family offices. "There is tons of opportunity in the U.S., but these folks are used to being the big fish in a small pond. They come here, and they might still be a big fish, but it’s a much larger pond.”
Callan Family Office targets fast-growing private credit market
By ANDREW COHEN
The over $2 trillion private credit market has emerged as an investment focus for Callan Family Office clients, the firm’s partner and CEO, Jack Ginter, tells Crain Currency.
“One of the areas that we’re particularly interested in right now are the private credit markets and clients accessing that through private vehicles, private debt managers,” Ginter said. “That’s an area that I think is informed by where we are in the current economic cycle.”
The private credit market, which spans nonbank financial institutions lending to corporate borrowers, reached $2.1 trillion in global assets and committed capital last year, according to the International Monetary Fund.
“Many of our clients are invested in private equity, private debt in addition to public markets and fixed-income markets, given their ability for long-term time horizons and the ability to take that level of risk,” Ginter said.
The Callan Family Office recently surpassed $5 billion in assets under management, with an average relationship of $100 million with its ultra-high-net-worth clients. Callan’s Endure program also focuses on providing family governance and educational services to clients.
“We have a series of programs where we work with families, and the root of it is typically around communication, education, and then the third area is really helping to prepare them to be stewards of this wealth,” Ginter said. “Whether it's this liquid wealth that we're managing or operating businesses, [it's] how we think about working with those families over time.”
The Callan Family Office launched in February 2022 as an independent RIA through its licensing deal with Callan LLC, a San Francisco-based consulting firm that has advised more than $4 trillion in assets. A recent Cerulli survey found that high-net-worth investors prioritized affiliation with national brands when selecting wealth advisers
LOOSE CHANGE
Billionaire shampoo honcho cleans up with $20 million sale of NY townhouse: Glenn Nussdorf, CEO of Long Island’s Quality King Distributors, has found a taker for a six-bedroom, six-floor spread on the Upper East Side.
Sentient Jet, Bobby Flay bring VIP breakfast to Kentucky Derby: The private jet company’s card holders will receive an exclusive invitation to Sentient’s annual Derby Day Breakfast.
Newly crafted pianos represent ‘lifelong dream’ for Gergely Bogányi: The handcrafted $300,000 pianos were made in collaboration with designer Péter Üveges.
Help us with a story: We’re working on a story about compensation for family office executives. If you have any comments on the topic, reach out to [email protected].