For high net worth individuals and families have their money working for them in many different areas. Usually, they own businesses that produce great profits and acquire assets to build their fortune. They need to manage this wealth accumulation and train the next generation so it is a lasting legacy.
This is where a family office comes in. A family office is a professional management company dedicated to the financial well-being of those with at least 50-100 million in investable assets. They support wealthy people’s vision and are a one-stop shop for a family enterprise’s expansive needs.
Managing a vast fortune to invest is no easy task, and it takes a dedicated team of talented and seasoned financial professionals to be successful in the growth of assets to those of affluence.
This is how family offices invest.
Ownership in public companies has offered great financial gains and is still an important part of a family office investment strategy. These offer capital appreciation and steady dividends that return cash to be reinvested gain, and there is a wide variety of stocks to invest in.
The benefits of putting your client’s money in equities are:
Multiple industries are on the stock market, and you can also invest in mutual funds, index funds, and EFTs.
Some equities pay out dividends to shareholders from their profits, giving you additional income to invest while the business increases in value.
Money can be put in many equities, and there is potential for a big payout if a business grows rapidly in value.
Bonds are another strong investment vehicle for family offices as they are fixed-income securities and are less risky than equity investments.
These government, municipal, and corporate-issued bonds provide regular income through interest payments and are part of a wise diversification strategy.
This trend is emerging among family offices and diversifies away from traditional asset classes. Direct investments include:
· Real estate projects
· Acquiring private companies
This strategy provides capital for funding development and growth, giving them greater control over investment decisions based on risk level, investment objectives, and values. With direct investing, they can strategically influence operational choices and direction of invested companies while making a meaningful impact that aligns with their environmental and social goals.
Along with the ability to focus on the family’s interests, direct investments have lower expenses than traditional investments and eliminate the layers of management fees contributing to long-term wealth preservation.
Commercial Real Estate
Owning property is always a great investment that traditionally increases in value, but besides the equity gained over time, you can also gain passive income through rental yields.
This can be done directly through the ownership and management of:
· Office buildings
· Residential properties
· Retail complexes
There is also a great opportunity to allocate capital into a real estate fund or REIT. Ultimately, real estate provides great long-term appreciation and rental income stability for financial growth and wealth preservation.
While traditional investments like stocks and bonds are always part of a family office’s diverse investment portfolio, digital assets are becoming more attractive and emerging quickly.
Transformative technologies are very popular, and growth opportunities are through the roof, depending on the tech space you enter. This has led the way for extreme wealth and is where family offices are putting more of their focus. AI is just one of the sectors growing fast, with many opportunities to make high yields.
Investments are made in assets like crypto and blockchain and through indirect exposure by investing in digital asset companies and enablers.
Beyond the regular investment vehicles are those that pay dividends to the environment. Family offices understand the changing tides of sustainability, and there are many opportunities to invest in making a positive social and environmental impact while building wealth. Food, health care, and agriculture are a few industries that keep with the theme, and clean energy is a priority for most governments, so it is a wise place to invest.
Ultimately, a family office offers sound financial advice, makes strategic investments, and provides financial teaching for the next generation to preserve generational wealth. This may be the best investment as it passes down knowledge and valuable assets through your family.
This is how family offices invest, and if you are looking for financial management of your wealth, seek out a family office dedicated to the tried and true investments of the past along with the emerging economic trends of the future.