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Pras Indrakumar
Jul 06 2018

What are Family Offices, and how has Australia seen its rise?

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What are Family Offices, and how has Australia seen its rise?
<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.&nbsp;Herein:&nbsp;general administration, reporting, investment analysis and managing the various activities or interests of the family members become the &#39;core operations&#39; of a family office.</p> <h4><strong>What does the Family Office basics entail?</strong></h4> <ul> <li>Clear Objective&nbsp;- in terms of wealth creation, preservation, and monitoring</li> <li>Investment - a&nbsp;minimum baseline; specific areas of interest;&nbsp;value propositions -&nbsp;which&nbsp;may vary in terms of the entry point and the stage of the company /&nbsp;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 -&nbsp;especially in terms of&nbsp;capital preservation;&nbsp;they are always looking to apply the best protection for the downside risk&nbsp;with solid moats</li> <li>Greater focus - towards philanthropy, social impact and giving back to the community</li> </ul> <p>We&#39;ve used the below infographic to reflect&nbsp;the ABCs of Family Office mechanics:&nbsp;</p> <p class="image-align-center"><img alt="" src="https://tat.capital/docs/uploads/2018/05/TAT FamilyOffice Infographic.png " /></p> <p>&nbsp;</p> <hr /> <h4><strong>FOs &amp; The Land Down Under:</strong></h4> <blockquote> <p>&quot;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&#39;ve been a relatively unknown quantity in the Australian market. So much so that back in 2014, an agribusiness executive at a major bank&nbsp;established a fake family office&nbsp;(the so-called Brook Family Office) and&nbsp;obtained confidential details about a competitor&nbsp;before being exposed as a fraud.&quot; writes AFR.&nbsp;</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>&nbsp;</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>&nbsp;</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.&nbsp;</p> <h4>&nbsp;</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&#39;s managing partner Will Hamilton, a family would need at least $100 million to invest to consider running 10 staff.&nbsp;</p> <h4>&nbsp;</h4> <h4><strong>Philanthropy:</strong></h4> <p>Here is some data on the give-aways from the AFR-JBWere&#39;s Philanthropy 50 List for 2018.&nbsp;</p> <h5>Top givers -&nbsp;Paul Ramsay&nbsp;/&nbsp;Ian Potter:</h5> <ul> <li>The&nbsp;Paul Ramsay Foundation was once again the biggest giver in financial&nbsp;2017, giving away $83 million.&nbsp;</li> <li>Ian Potter Foundation, which came&nbsp;second, gave away $35 million.</li> </ul> <h5>New Additions - Buxton / Thomas:</h5> <ul> <li>Property developer Michael Buxton&nbsp;and wife Janet donated $25 million of art and endowment funds. While they had wanted to build a&nbsp;museum to house their 350-piece art collection, they eventually&nbsp;opted to partner with the Melbourne of University.</li> </ul> <blockquote> <p>&quot;We thought about the longevity of the collection and the educational facilities that could&nbsp;be offered through a university ... and it all made sense&quot;&nbsp;&nbsp;- 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.&nbsp;</li> </ul> <p>John McLeod, co-founder of philanthropic services at JBWere and author of JBWere&#39;s Support Report, comments:&nbsp;<strong>&quot;The change in where the money is coming from is also changing to where it&#39;s going to!&quot;</strong></p> <p>&nbsp;</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&nbsp;group &#39;The Table Club&#39;&nbsp;</li> <li>It compares to $282.7 billion held by the country&#39;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&nbsp;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 &quot;first generation&quot;), and only a quarter are in the second generation. <ul> <li>By the third generation, often the money has been divided up or shrunk &ndash; hence no more need for a family office.</li> </ul> </li> </ul> <blockquote> <p>&quot;Five years ago I&#39;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&quot;&nbsp;says Deloitte Private tax partner Michelle Hartman.</p> </blockquote> <p>With&nbsp;global exposure as one of the&nbsp;common themes,&nbsp;Macquarie Private Bank&#39;s executive director Justin Crawford says the bank&#39;s global reach, often in renewables and tech-type exposure, appeals to family offices,&nbsp;usually in the form of co-investments.&nbsp;</p> <p>He however differentiates high-net-worth individuals from family offices like this:</p> <blockquote> <p>&quot;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.&quot;</p> </blockquote> <p>Investment banker Jon Biesse adds,&nbsp;</p> <blockquote> <p>&quot;People go to family offices now ahead of private equity, because of the benefits of the long-term view.&quot;&nbsp;</p> </blockquote> <p>&nbsp;</p> <p><u><strong>Source:</strong></u>&nbsp;<a href="http://www.forbesindia.com/article/spjimr/the-evolution-of-family-offices/50311/1" target="_blank">FO evolution</a>&nbsp;-&nbsp;Forbes&nbsp;| <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?&amp;et_cid=29125089&amp;et_rid=1925808675&amp;Channel=Email&amp;EmailTypeCode=&amp;LinkName=http%3a%2f%2fwww.afr.com%2flifestyle%2farts-and-entertainment%2fart%2fphilanthropy-50-list-rich-give-more-others-less-20180425-h0z81l%3f&amp;Email_name=MW5-04-26&amp;Day_Sent=26042018#ixzz5Dpf0Dyt1%C2%A0" target="_blank">Philanthropy 50</a>&nbsp;-&nbsp;AFR</p> <p>&nbsp;</p> <p style="text-align:center"><strong>&diams; More Insights on TATFO&diams;</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&#39; 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>

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