The family office landscape in North America
Family offices continue to evolve and seek innovative ways to navigate an ever-changing environment. The 2024 North America Family Office Report explores this journey by examining 183 family offices across Canada and the United States, offering comparisons to global peers.
Executive summary
This report, which is accompanied by Asia-Pacific and European editions, is based on a statistical analysis of 360 survey responses from single family offices and private (non-commercial) multi-family offices worldwide. Of these, 183 are located in North America. The survey was conducted between March and June 2024. On average, families participating in the survey have total wealth (including operating businesses) of US $1.5 billion, and their collective wealth stands at US $268 billion. Their family offices have, on average, US $1.0 billion of assets under management (AUM), whilst aggregate AUM stand at US $181 billion. Across all three geographies covered in our global report, total family office AUM is estimated at US $368 billion.
Competence
Approximately 80 percent of participants viewed their family office as effective at overseeing the intergenerational transfer of family wealth, at making informed decisions and communicating with family members. However, smaller percentages (63-74 percent) viewed their family offices as ineffective at fostering a collaborative approach between family members and avoiding conflicts between them.
Governance
A third of survey participants are first-generation family offices. They tend to be “light” on governance structures and documentation because first-generation wealth creators are accustomed to making decisions independently, and don’t feel the need to formalize how their family office will function. This factor, together with the relatively small size of first- and second-generation families may explain why only half of participating North American family offices have a mission statement or family council.
Investing preferences
In public markets, family offices’ preferred asset classes and investment themes are growth equities, defence industries, and obesity drugs. Long-duration bonds and Indian and Chinese equities are amongst the least favoured. In private markets, credit is the most sought-after asset class, and AI, automation, and healthcare are the technologies most likely to attract new investment.
Investment performance
Year-to-date financial markets have been relatively kind to family offices with more than 40 percent anticipating an investment return of over 10 percent for full year 2024. A strong performance from public markets has provided this sentiment but returns from real estate, venture capital and private equity funds are generally below expectations.
Market risks
Last year, the majority of family offices believed the U.S. economy would go into recession but fortuitously these expectations proved too pessimistic. Currently, the most frequently cited concern is the stickiness of inflation, which is preventing the Federal Reserve from cutting interest rates or at least reducing them at the pace which seemed likely a few months ago.
Philanthropy
Driven by a strong desire to give back to society, three-quarters of North American family offices make philanthropic donations. The majority of donations are in excess of US $1 million and a limited number of large donations pushes the average up to US $10 million. Philanthropy is seen by many as an opportunity to put family values into action and engage the next generation.
Private markets
A key feature of family office investment in recent years has been an ever-increasing allocation to private markets, which now constitute 30 percent of the average portfolio. Family offices still expect private equity and venture capital to supply the best long-term risk-adjusted returns despite recent disappointing outcomes and liquidity problems caused by reduced exit activity.
Real estate
As a result of oversupply and high interest rates, U.S. commercial real estate is widely viewed as problematic. There could be serious issues for family offices because this is their third largest asset class. But fortuitously family offices are investors rather than developers, and they have the advantage of local knowledge of the regional locations which comprise the national real estate markets.
Recruitment
Finding finance professionals from external organizations is a challenge for family offices, not least because as in the commercial world, they expect performance to be rewarded financially. In order to aid recruitment and retention, bonuses which are offered by around 80 percent of family offices are being supplemented with other forms of incentivization including co-investment opportunities, shares of investment management profits and options on phantom equity.
Responsible investing
Based on survey responses, slightly more than a quarter of family offices adhere to responsible investing principles. Around half the members of this group are engaged in outcome-focused impact investing. For 80 percent of responsible family office investors, adopting this strategy does not mean accepting lower financial returns.
Download the full North American Family Office Report