Managing trillions of dollars of assets on behalf of prominent families, family offices need constant insights into key issues impacting wealth. Here are some of the cutting-edge takeaways from a flagship family office gathering.
Family offices are overseeing a growing share of wealth globally. Not only are their number and assets increasing but their roles are also expanding. In addition to core wealth management activities they are frequently entrusted with such tasks as helping to prepare all younger family members to be responsible wealth owners and some of them to play a leading role in their family enterprise.
These weighty mandates call for family office executives to stay abreast of a daunting range of topics. With one of the largest family office networks globally, Citi Private Bank recognizes the challenges involved and offers ongoing insights to address them. One of the ways we do this is via our Family Office Leadership Program.
The ninth edition of this flagship annual event took place in June 2024 in New York. More than 150 leading family office clients from over 25 countries worldwide attended for networking and idea sharing. Seventy expert speakers – including household names from diverse fields – contributed to lively panel sessions including macroeconomics, artificial intelligence, investment strategies, family office best practices, and philanthropy.
Here we offer a brief summary of some of the key messages that delegates took away from the two-day event.
n Finding alpha in a slow economy
Family offices are optimistic about the investment outlook, remaining positively positioned despite geopolitical concerns. AI and technology are expected to be as transformative as the internet from the late 1990s onward. But rather than letting this area dominate allocations, maintaining dynamic globally diversified multi-asset class portfolios may prove the most effective approach over time.
> Food for thought: “When to cut a position? It’s important to be honest about why you put on a position to begin with. Is the thesis still the same? If so, doing nothing – at least for a while – may potentially be a favorable strategy.”
n Real estate revival
Potential real estate opportunities in the post-pandemic world are in focus among family offices. Some indicators suggest real estate values bottoming despite often gloomy news headlines. Certain subsectors are indeed suffering pricing dislocations, such as Chinese residential and older, lower quality and less favorably located offices in many countries. However, there are some sweet spots, including residential in the US and logistics facilities in Western Europe.
> Food for thought: “Take a step back. What are the big secular trends in the world and which real estate subsectors and geographies may benefit?”
n The business of sports
Sports is an area of increasing focus as an asset class. Most capital flows toward the top leagues. As an asset, a sports franchise can potentially represent a local monopoly with commercial real estate backing, tax deductions on interest payments, and cash flows from media rights and fans. Sports content is unlikely to be supplanted by AI and women’s sports will likely see increasing momentum.
> Food for thought: “Sports fans can be a source of stable revenue streams”
n Healthcare: A prescription for growth
Healthcare could become increasingly personalized and focused on keeping people well rather than treating the sick. In recent decades, by contrast, the US has seen a rising proportion of chronically ill patients receiving ever more care. If unaddressed, this trend would impose a huge financial burden. AI has potential, particularly for cutting administration costs nearer term. More direct AI involvement in patient care may take longer.
> Food for thought: “Might humanity reach escape velocity in the years ahead, whereby for each year lived, life expectancy goes up rather than down?”
n Lessons from generational transitions
Leadership transitions are a critical issue for family offices and wealthy families more broadly. Preparing those who will head the family, its business, its philanthropy, and influence the direction of its family office is a process best undertaken thoughtfully and in plenty of time. Based on our experience of serving those who have successfully achieved such transitions, we explored some of the lessons that may assist in this:
- Recognize that what got you here won’t get you there. As the environment changes, so do the qualities required of leaders. A common mistake during succession is to seek out new leaders who share the same characteristics as the outgoing leaders.
- Ask why should we stay together? By keeping family wealth and talent combined within a family office, potentially greater results can be achieved than if people and capital part ways. But a shared vision and values are vital if this is to succeed. Posing the fundamental question of “why?” is a good way to define these elements.
- Decide who will lead the process and set some goals. Specific goals and an accountable leadership are necessary for transforming values and vision into action. Goals should be realistic and measurable, while the leader should have real authority even within a framework of consensual decision-making.
- Determine the right level of togetherness. It doesn’t have to be all or nothing. Each family needs to find a balance that works for them. This may mean some projects or new ventures are undertaken by some family members alone and perhaps for their benefit alone. But this may still be compatible with a collective overall approach when it comes to family office matters, business or philanthropy.
- Assess your options and make educated decisions. Resist the temptation to take the path of least resistance, as it might not lead to the most sustainable answer. Leave no stone unturned and have no sacred cows. Instead, make educated decisions.
- Remember that every generation is a first generation. Respecting and learning from the past is important. But the next generation must be allowed to be more than just a link in the generational chain. This means creating opportunities to pursue their purpose and priorities through family investing, business, giving back, advocacy and more.
- Accept that the family office must evolve or disappear. Over time, families multiply, with branches likely to be more geographically spread, often less close personally, and perhaps with diverging views and agendas. The family office needs to be prepared to adapt accordingly.
To shed further light on some of these and other pressing issues for family offices and the families they serve, we will publish our Family Office Survey Report 2024 in September. And every quarter, we also address our family office clients’ latest investment positioning in our Family Office Investments Report. If you’re interested in accessing these insights or speaking with a member of our Family Office team, get in touch via our website.