Family offices are the new power players on Wall Street.
A growing number of wealthy Americans are launching family offices, firms that do everything from investing money for the superrich to managing their personal affairs. They are huge and secretive, and their influence on Wall Street and Main Street is only growing.
Families with these offices recently oversaw about $5.5 trillion in wealth, a 67% jump from five years ago, according to Deloitte. The firm expects that figure to rise to $6.9 trillion this year and top $9 trillion by 2030. It estimates that in coming years, these offices will manage more money than hedge-fund firms.
Banks and other firms are hungry to cater to family offices’ every need, while entrepreneurs and investment managers are clamoring to land a slice of these families’ immense wealth.
“It’s not just growing, it’s exploding,” said Hendrik Jordaan, a partner at Nelson Mullins who works exclusively with family offices. “I really think about the family office world being the next private equity.”
Launching a family office is in vogue. While the biggest ones have long managed billions of dollars on behalf of titans such as Jeff Bezos, Michael Dell and Bill Gates, many families with hundreds or tens of millions of dollars in wealth are launching them, too, or turning to so-called multifamily offices to manage their fortunes. There are more than 8,000 single-family offices globally today, up roughly a third from 6,130 in 2019, according to Deloitte. The firm expects that figure to top 10,000 by 2030.
“It’s kind of become the word for ultrahigh-net-worth families. Do you or don’t you have a family office?” said Justin Flach, managing director of wealth strategy for Ascent Private Capital Management at U.S. Bank, who typically works with families with net worths topping $75 million.
“There’s some status assigned to that. You’re at a cocktail party talking about it,” Flach said.
How the superrich deploy their firepower has vast implications for the fortunes of businesses in almost every U.S. industry, global philanthropy and the broader economy. As this money trickles through the economy, it stands to transform the fate of businesses tied to everything from artificial intelligence and data centers to dental offices and medical spas.
Given the sums they can invest, big family offices can sometimes compete against large institutional investors on deals, putting them up against behemoths such as Apollo Global Management and Blackstone.
Family offices can find their way into public-company merger deals, too. The offices of late Pequot Capital founder Arthur Samberg and Addison Fischer are among the backers of fusion-energy company TAE Technologies, which struck a deal this month valued at $6 billion to merge with Trump Media and Technology Group.
Unlike public pension-fund managers, who answer to local teachers and firefighters, or hedge-fund firms, which regularly provide financials to investors, family-office leaders don’t answer to anyone but themselves. That gives them vast latitude to hold investments for decades and ride out periods of stomach-churning volatility, or make large and concentrated wagers. Traders and advisers say that family offices often have little interest in hedging their bets through tools such as derivatives.
That willingness to hold on to bullish bets on particular stocks or sectors makes them an attractive source of funds for many businesses.
“We get pitched a lot,” said entrepreneur and philanthropist Vinod Gupta, who started his family office, Everest Group, more than a decade ago with more than $100 million, after selling one of his companies. “I bet I get three emails a day. Of course, I just delete them.”
Gupta employs about seven people, including two who oversee investments. His donations to organizations such as the University of Nebraska and schools in India have been done through the office, he said.
Family offices are often the centerpieces of wealthy families’ financial lives. Many handle mundane tasks such as paying thousands of bills a year for wealthy individuals and their offspring so they never have to glance at a credit-card statement. They help staff individuals’ estates around the world and liaise with advisers to pick out, and finance, toys such as planes and yachts. They can oversee teams of assistants who do everything from booking travel to managing packing suitcases and making restaurant reservations.
Some employ just a handful of individuals to help with estate planning and investing, while others have dozens or hundreds of employees. Staff can include everyone from household managers to psychologists. More than a fifth of family offices with more than $500 million in assets have art advisers, according to a Citi survey of more than 300 family offices this year.
Betsy Bickar, head of art advisory at Citi, recently took a wealthy Latin American family to the Guggenheim Museum in New York City while its doors were closed to the general public. They roamed the museum while it was virtually empty, viewing artwork by the Brazilian artist Beatriz Milhazes and Rashid Johnson, who is known for monochromatic, textural wall works made from a concoction of soap and wax.
Big banks and money managers are offering family-office services for investors who aren’t quite billionaires, and might have tens or hundreds of millions of dollars. (Sorry, these aren’t for the moderate millionaires.) There are now about 800 registered investment advisers who call themselves multifamily offices, meaning that they can oversee wealth for dozens of families, an estimated 30% increase in the past 10 years, according to Schwab Advisor Services.
Running an individual office can cost millions a year. Firms such as Mercer Advisors and Corient provide these family-office services to clients with more than $25 million in assets. Some firms require minimums of just $10 million.
Ultrarich investors are often nosy about what their peers at other family offices are up to, and which deals they are getting a peek at. They can move in packs, getting in on the same investment after one of them gets a whiff of a particularly attractive opportunity. An office connected to a network of families might be able to secure more attractive deal terms, and clubs of families that invest together have emerged, lawyers and advisers say.
“Family offices love to talk to other family offices,” said Dino De Vita, who works with more than 550 of Northern Trust’s richest clients within its global family and private investment offices group.
Write to Gunjan Banerji at gunjan.banerji@wsj.com