Q/A: Global Differences in $1 Billion-Plus Single Family Offices

Q/A: Global Differences in $1 Billion-Plus Single Family Offices

A Q&A with Richard C. Wilson CEO/Founder, Billionaire Family Office

Overview

Q: How are single family offices operating in Asia and Latin America compared with Europe and the United States?

Q: Do Asian and Latin American family of ces need to formalize and become more like their U.S. counterparts?

Q: How do you see single family offices developing in BRIC countries, and how does activity there re ect the growth of wealth globally?

Q: When single family offices are operating on a large scale, in a country known for corruption, how do families operate while staying under the radar?

Q: What is the number-one frustration that you hear about while working with families that have more than $1 billion in wealth to manage?

Q: How do families get access to direct investments while still remaining secretive, and can that even be accomplished without hiring an investment banker or third party of any type?

Q: How can families take a more sophisticated approach to direct investing so it is not done haphazardly? What is the best model you have seen?

Q: So much of investing is team evaluation—you had mentioned before a model your team uses for character analysis—can you share a few comments on that?

Q: What is the most counter-intuitive lesson you have learned from working on mandates for the largest families?

Family Office Association: How are single family of ces operating in Asia and Latin America compared with Europe and the United States?

RCW: Many of the $1 billion-plus single family offices in Asia and Latin America are much more focused on operating businesses, commercial real estate, and hard assets than their U.S. and European counterparts are. For instance, the last time I met with a room full of private bankers, wealth managers, and multi-family offices types in Moscow, not a single one had a “westernized” diversi cation model in their investment portfolio that included hedge funds, private equity, public markets, commodities/hard assets, bond investments,

etc. They were all invested almost exclusively in commercial real estate and operating businesses. So while some Asian families may have one or two components of a diversi ed portfolio, none of them have all of those assets: bond investments, private equity, hedge funds, equity markets, hard assets, etc.

In both Asia and Eastern Europe, secrecy is valued as much as—if not more than—investment returns. These wealthy individuals fear being hit with additional regulation, investigations or corruption in one form or another if anyone were to know their true net worth.

Many of the larger family offices in the East, with the exception of the most formalized in Singapore, Hong Kong, Tokyo and Australia, are managed by family members or close friends and con dants of the family. As a family’s wealth increases, its need to employ professionals underneath family members to help run operations and manage partnerships increases, but in every one of my relationships with $1 billion+ families, there is at least one family member serving in a top position, typically as CEO or CIO. This is at odds with family offices of the West, which are typically managed by investment professionals. The biggest factors driving this divergence are secrecy concerns and loyalty.

In Latin America, I have found a middle ground: strong business ties to the U.S. and a robust westernized banking center have led to well over 500 hedge funds and private equity funds operating in Sao Paulo alone. Furthermore, the concept of allocating to investment fund managers is becoming much more widely accepted in Latin America. Many of the most af uent families in Latin America have diversi ed their wealth through investment fund managers, but not to the degree of the average U.S. single family offices.

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