What are Family Offices, and how has Australia seen its rise?
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<p>Family Offices (FOs) are set up with the primary objective of preserving family fortunes and non-financial purposes like philanthropy, tax advising, education, etc. Herein: general administration, reporting, investment analysis and managing the various activities or interests of the family members become the 'core operations' of a family office.</p> <h4><strong>What does the Family Office basics entail?</strong></h4> <ul> <li>Clear Objective - in terms of wealth creation, preservation, and monitoring</li> <li>Investment - a minimum baseline; specific areas of interest; value propositions - which may vary in terms of the entry point and the stage of the company / project where they see the most upside</li> <li>Management Structure - depending on the family office type (single family office or multi-family office)</li> <li>Coping with Challenges - especially in terms of capital preservation; they are always looking to apply the best protection for the downside risk with solid moats</li> <li>Greater focus - towards philanthropy, social impact and giving back to the community</li> </ul> <p>We've used the below infographic to reflect the ABCs of Family Office mechanics: </p> <p class="image-align-center"><img alt="" src="https://tat.capital/docs/uploads/2018/05/TAT FamilyOffice Infographic.png " /></p> <p> </p> <hr /> <h4><strong>FOs & The Land Down Under:</strong></h4> <blockquote> <p>"Family offices have always had pulling power. Shrouded in privacy, and with the suggestion of enormous wealth and the access and contacts that go with it, they've been a relatively unknown quantity in the Australian market. So much so that back in 2014, an agribusiness executive at a major bank established a fake family office (the so-called Brook Family Office) and obtained confidential details about a competitor before being exposed as a fraud." writes AFR. </p> </blockquote> <p>Check out the data chart from Deloitte below to see how much big the FO landscape has become today:</p> <p class="image-align-center"><img alt="" height="550" src="https://tat.capital/docs/uploads/2018/05/hnwi afr industry.png " width="486" /></p> <p> </p> <p class="image-align-center"><img alt="" height="800" src="https://tat.capital/docs/uploads/2018/05/fo stats.png " width="343" /></p> <p> </p> <p>Recognised as a separate and significant pool of capital, there is a rising number of family offices, and the phrase has become a common knowledge for the world at large. More and more HNWIs are increasingly looking at managing their own substantial assets and related investments. </p> <h4> </h4> <h4><strong>Structure: </strong></h4> <p>At the larger end, family office employees would normally include investment analysts, tax experts and accountants as well as administrative staff. For property-focused family offices, that may also include development experts. According to Hamilton Wealth's managing partner Will Hamilton, a family would need at least $100 million to invest to consider running 10 staff. </p> <h4> </h4> <h4><strong>Philanthropy:</strong></h4> <p>Here is some data on the give-aways from the AFR-JBWere's Philanthropy 50 List for 2018. </p> <h5>Top givers - Paul Ramsay / Ian Potter:</h5> <ul> <li>The Paul Ramsay Foundation was once again the biggest giver in financial 2017, giving away $83 million. </li> <li>Ian Potter Foundation, which came second, gave away $35 million.</li> </ul> <h5>New Additions - Buxton / Thomas:</h5> <ul> <li>Property developer Michael Buxton and wife Janet donated $25 million of art and endowment funds. While they had wanted to build a museum to house their 350-piece art collection, they eventually opted to partner with the Melbourne of University.</li> </ul> <blockquote> <p>"We thought about the longevity of the collection and the educational facilities that could be offered through a university ... and it all made sense" - M Buxton.</p> </blockquote> <ul> <li>Thomas Foundation, established by David Thomas and his late wife Barbara gave away $4 million to marine research, the environment, asylum seekers and medical research. </li> </ul> <p>John McLeod, co-founder of philanthropic services at JBWere and author of JBWere's Support Report, comments: <strong>"The change in where the money is coming from is also changing to where it's going to!"</strong></p> <p> </p> <h4><strong>Trends:</strong></h4> <ul> <li>In Australia, the top 200 single family offices (SFOs) had a total wealth of $267 billion as of June 2017: Deloitte Access Economics and FO group 'The Table Club' </li> <li>It compares to $282.7 billion held by the country's richest 200 individuals: Financial Review Rich List</li> <li>The number of individuals with net assets of $40.5 million or more has grown by 85% in Australia over the past decade to 2016. This is expected to grow an additional 70% by 2026.</li> <li>68% of the top 200 SFOs are still controlled by the people who made the money (the "first generation"), and only a quarter are in the second generation. <ul> <li>By the third generation, often the money has been divided up or shrunk – hence no more need for a family office.</li> </ul> </li> </ul> <blockquote> <p>"Five years ago I'd talk to about a quarter of the number of families about family offices as I do now. Families are either selling out or looking at diversifying wealth away from the business they manage" says Deloitte Private tax partner Michelle Hartman.</p> </blockquote> <p>With global exposure as one of the common themes, Macquarie Private Bank's executive director Justin Crawford says the bank's global reach, often in renewables and tech-type exposure, appeals to family offices, usually in the form of co-investments. </p> <p>He however differentiates high-net-worth individuals from family offices like this:</p> <blockquote> <p>"We see a lot of family offices as more self-directed, and we provide execution services or deal flow, while high net worth individuals the focus is more around investment portfolio construction."</p> </blockquote> <p>Investment banker Jon Biesse adds, </p> <blockquote> <p>"People go to family offices now ahead of private equity, because of the benefits of the long-term view." </p> </blockquote> <p> </p> <p><u><strong>Source:</strong></u> <a href="http://www.forbesindia.com/article/spjimr/the-evolution-of-family-offices/50311/1" target="_blank">FO evolution</a> - Forbes | <a href="http://www.afr.com/leadership/afr-lists/rich-list/lessons-from-how-the-rich-invest-the-rise-and-rise-of-the-family-office-20180517-h1062w" target="_blank">Rise of FOs</a> / <a href="http://www.afr.com/lifestyle/arts-and-entertainment/art/philanthropy-50-list-rich-give-more-others-less-20180425-h0z81l?&et_cid=29125089&et_rid=1925808675&Channel=Email&EmailTypeCode=&LinkName=http%3a%2f%2fwww.afr.com%2flifestyle%2farts-and-entertainment%2fart%2fphilanthropy-50-list-rich-give-more-others-less-20180425-h0z81l%3f&Email_name=MW5-04-26&Day_Sent=26042018#ixzz5Dpf0Dyt1%C2%A0" target="_blank">Philanthropy 50</a> - AFR</p> <p> </p> <p style="text-align:center"><strong>♦ More Insights on TATFO♦</strong></p> <table align="center" border="0" cellpadding="1" cellspacing="1" style="width:800px"> <thead> <tr> <th scope="row"> <ul> <li style="text-align:left"><a href="https://tat.capital/Blogs/Permalink/aiding-australian-family-offices-to-turbo-charge-portfolios-with-indian-investment-opportunities">Aiding Australian Family Offices to Turbo-Charge Portfolios with Indian Investment Opportunities</a></li> <li style="text-align:left"><a href="https://tat.capital/Blogs/Permalink/should-australian-family-offices-listen-to-global-investors-view-on-india">Should Australian Family Offices listen to global investors' view on India</a></li> <li style="text-align:left"><a href="https://tat.capital/Blogs/Permalink/impact-of-iot-on-family-offices-investments-into-iot-companies-and-a-snapshot-of-the-australia-india-iot-space">Impact of IoT on Family Offices, Investments into IoT companies and a Snapshot of the Australia-India IoT space</a></li> <li style="text-align:left"><a href="https://tat.capital/Blogs/Permalink/global-fo-trends-and-where-australian-family-offices-are-investing">Global FO Trends and Where Australian Family Offices are Investing</a></li> </ul> </th> </tr> </thead> </table>