When the Family Office Becomes an Institution

Today’s Complex Holdings Demand Up-To-Date Technical Horsepower
by William Trout,  Jay Wolstenholme, September 29, 2016
Industry Trends
Global

Abstract

Celent has released a new report titled When the Family Office Becomes an Institution: Today’s Complex Holdings Demand Up-To-Date Technical Horsepower. The report was written by Will Trout and Jay Wolstenholme, senior analysts in Celent’s Securities & Investments practice.

Family offices can range in size from $50 million to more than $5 billion in assets under management. They may support a single family or develop into a multi-family (MFO) entity. In all cases, the increasing complexity of their businesses mandates greater operational capacity. Indeed, new security and regulatory requirements and the need for risk analytics, as well as the demands of managing a multiasset portfolio, will often necessitate a technology refresh outright.

In the go-go 1990s and first decade of this century, fat margins led many family offices to reconstitute themselves as hedge funds. Expanding the universe of clients beyond the immediate family or families allowed greater access to capital and alternative assets, as well as the ability to diffuse administrative costs across a larger organization.

“As family offices reconcile their need for technological sophistication and growth with their innate distaste for capital expenditure, sourcing options come into play,” says Trout.

Many family offices now have institutional operational requirements, demanding sophisticated trading and portfolio management operations according to investment strategies and timeframes.

“Large multifamily offices are requiring much more advanced and sophisticated technical portfolio management systems in order to meet functional requirements for investing as well as satisfying family client reporting requests. Advanced family offices are even moving into real-time OMS and PMS applications,” comments Wolstenholme.   

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction

3

 

Key Research Questions

3

Family Office Overview and Current Dynamics

4

 

Types of Family Office

4

Family Office Core Functions

6

 

Investment and Portfolio Management for Family Offices

6

 

Asset Allocation Models

7

 

Portfolio Construction

8

 

Trading

9

 

Portfolio Management

9

 

IBOR

12

 

More General Working Definition

13

Family Office Sourcing Options

14

 

Operations and Systems Sourcing Options

14

 

TAMPS — Another Form of Investment Outsourcing

16

Conclusion

17

Leveraging Celent’s Expertise

18

 

Support for Financial Institutions

18

 

Support for Vendors

18

Related Celent Research

19

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