The report, based on information from 120 Gulf Cooperation Council (GCC) investment professionals, suggests that ultra-high net worth individuals (UHNWI) in the Middle East are favouring the services of SFOs over multi-family offices (MFOs):
- Single-family offices: a family sets up a dedicated team to advise on investments (mergers and acquisitions), procurement services, relationship management, succession planning, governance, and family architecture.
- Multi-family offices: attempt to pool multiple families’ money and provide personal advisory services such as fund selection and asset allocation.
Shift from personal to corporate wealth
The most prominent asset management trend in the UHNW segment has been the reduction in capital ﬂow from personal assets of an UHNW individual to corporate (family business) assets. This is apparently due to reduced funding requirements in family businesses, which the report attributes to improved business performance and cash flow generation, and the greater willingness of banks to lend to family businesses.
Single-family offices and multi-family offices have very different propositions for their ultra-high net worth clients. SFOs in the Middle East’s dominate in both popularity and the amount of assets under management.
Control, trust, and confidentiality important to high-net worth clients
High-net worth clients appreciate the control, trust, and confidentiality provided by dedicated family offices, while increasingly relying on larger investment banks for asset allocation and fund selection services. According to the report:
“This has forced MFOs to participate behind SFOs in the value chain and compete more directly
with international private banks on investment services. However MFOs are losing out in both parts of the chain: a light-touch SFO model run by a trusted employee is better placed than an MFO to offer control and conﬁdentiality while international private banks servicing a global UHNW customer base are better placed to offer scalable execution services. Furthermore, MFOs seek a holistic client relationship but even where they have had some success in the
GCC, executives believe they only advise over a small share of total family assets.”
This leaves multi-family offices in a tough competitive position.
For more information, read the Invesco Middle East Asset Management Study 2013 (PDF 2.57 MB).