Family Offices : The Rise In Popularity Of Alternative Structures - Part 1

• Published date: 07 July 2020
• Subject Matter: Finance and Banking, Wealth Management, Financial Services, Fund Management/ REITs, Wealth & Asset Management
• Law Firm: Intertrust
• Author: Mr Ian Rumens

If you performed an autopsy on a family office, it wouldn't reveal a universal organisational template structure chart Instead, its DNA would reveal the simple concept of professionalising a family's personal and commercial affairs.

Essentially a family office is aiming to be an addition of value. In striving to add value, a common theme is the amount of families benefiting from alternative structures to hold, manage and enhance their wealth.

Our private wealth and funds teams have increasingly been collaborating with advisors and clients, specifically focusing on assisting these family offices in structuring private investments through less traditional routes.

The generation game

One of the biggest challenges facing families is the ability to plan and successfully execute the transfer of inter-generational wealth and the succession or professionalisation of a privately-owned business. Few manage to achieve this whilst maintaining the family's level of wealth, their reputation and importantly ensuring family harmony. In looking to achieve the holy grail of inter-generational wealth transition, many family offices have traditionally turned to a trust or a private trust company (in common law jurisdictions), or a foundation (in civil law jurisdictions) to hold and structure their family wealth.

More often than not, these structures subsequently hold a web of Special Purpose Vehicles (SPV) which own assets as diverse as real estate, private company shares, investments, private equity and institutional equities, through to super yachts, aircraft and fine art. Family offices often also provide additional services such as family management services, family and corporate governance financial and investment advice, consolidated reporting philanthropy coordination and, on occasion, education for future generations.

Funds for families

In the pre-COVID environment, where the world's richest global families were increasing their wealth, the podium places for vehicles used in structuring family assets remained the preserve of trusts, private trust companies and foundations - all with underlying SPVs. However, among the structuring alternatives there's a new challenger to consider - funds management. As the wealth of the family office grows, it becomes more institutionalised in its approach to managing and structuring its assets. In some cases, the family office begins to behave more like a fund manager and with this change, the fund vehicle becomes more...