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The wealth of ultra-rich families will likely swell to US$9.5 trillion by 2030, according to estimates from consultancy Deloitte Canada, as family offices grow and morph to rival hedge funds.
The figure would mark a 73 per cent jump from the current US$5.5 trillion controlled by people represented by family offices, according to the report. The number of investment firms for the wealthy is expected to grow by one-third over the same time period, to 10,720.
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As wealth inequality concentrates more money in the hands of the very rich, and as it becomes easier to open a family office, the industry is catching up with hedge funds in size and — in some cases — hiring from a similar pool of professional investors.
Large family offices are carving out new roles in the market, including as activist investors, overthrowing corporate managers and pushing for change. The looser restrictions on these firms, and the potential for their investment behaviour to have outsize ripple effects, was on full display in the 2021 implosion of Bill Hwang’s family office Archegos Capital Management. (In July, a jury found Hwang guilty on criminal charges stemming from the collapse.)
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Family offices surveyed in the Deloitte report had an average of just 15 employees, handling US$2 billion in assets. Only about one-third were run by someone outside the family.
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“It can definitely be risky managing that much wealth,” said Rebecca Gooch, global head of insights for Deloitte Private, which caters to closely held companies. “Family offices really need to be careful about who they bring on board.”
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