The rise of direct investing in the Family Office


August 19, 2020

By Eddie Brown, Paul J. Ferguson, and Jill Matesic, Schwab Advisor Family Office

Within the wealth management industry, there is tremendous interest in family offices, as they become an increasingly substantial player in the space. However, given their private nature, it is inherently challenging to understand their size, number and assets under management.

Schwab Advisor Family Office entered a strategic partnership with FINTRX in which Schwab helps support FINTRX research through sponsorship to help independent registered advisors understand this otherwise opaque segment of wealth management and to provide insights into how the ultra-wealthy think about wealth and opportunity.

Since its inception in 2014, FINTRX has compiled data on more than 2,750 family offices globally. The emphasis on ‘data’ is critical. Most information about family offices comes from surveys. While they can be valuable, surveys often contain information about only a limited subset of those that are willing to participate. FINTRX is constantly expanding their family office database providing bottom up, data driven research.

Earlier this year we sponsored the first of a three-part ‘Family Office Industry Briefing Series’ from FINTRX. Part I looked at the geographic breakdown and asset distribution of the global family office ecosystem and you can read more about it here.

Part II was just released and this time it looks closely at direct investing by family offices as these kinds of opportunities are increasingly being explored for their ability to offer different transparency and control. Here are the key takeaways:

  • There are approximately 3,500-5,000 Family Offices throughout the world that have one or more employees and some form of external investment activity. Currently, we estimate that 39% are Single Family Offices and 61% are Multi Family Offices.
  • Direct Investments have become increasingly common throughout the Family Office space, a trend driven by many factors, including increased sophistication of Family Offices themselves. Currently, just over half (50.9%) of all Family Offices worldwide consider making direct investments. In North America, 82.1% of SFOs and 26.7% of MFOs make direct investments.
  • The data shows Family Office entities founded in recent years are more inclined to invest in opportunities directly. More than two thirds of Family Offices founded after 2015 are actively participating in direct investment opportunities, while less than a quarter of groups founded prior to 1985 are actively making direct investments.
  • The Family Office Market represents a diversified cross section of the private wealth landscape. Their direct investment interests reflect that diversity. 61.4% of global Family Offices that actively allocate directly, do so to some degree within the technology industry. 45.1% invest in Consumer Goods, 44.2% within the Business Services industry and 44.1% to the Healthcare and Biotechnology sectors.

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