The Family Office (FOs) are facing a scenario of strong evolutions. Nevertheless. more and more families are choosing this solution for managing their assets. PWC has recently published the Family Office Survey 2021, a survey between the Italian Family Office (including the Italian part of Switzerland), now in its seventh edition.
There are several challenges with which Italian Family offices are facing. The lowest interest rates in history are causing loss of faith in the mandatory asset class, which is no longer considered as a diversification tool, resulting in a rebalance of asset allocation. On the other hand, private equity is the one that is taking the leading role, also for the entrepreneurial nature of the families that prefer to have an active role in management rather than being mere beneficiaries of financial returns.
Following are the main points from the survey:
Family Offices are founded for two main reasons: monitoring the assets before making business decisions which are coherent with the objectives of the family (34%) and diversify assets (29%). Fiscal efficiency (10%), preserving the legacy (10%) and family privacy (5%) are goals that are considered as secondary. Around 42% of assets by the interviewed families followed by FOs are part of the manufacturing industry, followed by the RE industry (11%) and the commercial industry (9%).
The structural costs for SFOs result higher with respect of MFOs. In the average, SFO’s sustain structural costs of about 0.78% of the managing assets, while the MFO’s sustain about 0.28%. The most substantial cost is the one regarding personnel. The assets managed by MFOs are higher: the majority record assets above EUR 500mln. Vice versa, majority of SFOs manage assets below EUR 250 min.
88% of Family Offices carry out an investment activity for families. Significant part of tasks is carried out in-house, while general advisory services are often outsourced. Investment activity is rarely delegated to third parties at all, as it appears to be the most important of all the activities carried out internally by Family Offices. In particular, asset allocation choices, definition of investment strategy, asset monitoring and alternative investments are considered to be the most important activities. Only most specialized skills or non-recurring activities are outsourced, such as professional services in tax, legal consulting and consulting for high value-added assets (real assets).
Over the following 12 months, the Family Office plans to reduce its allocation to developed-country bonds and increase its exposure to the private capital component, both directly (direct investments in companies, co-investments and club deals) and indirectly (mainly private equity and venture capital).
The fixture on technology is indispensable for the Family Office, especially for the monitoring activities of both liquid and illiquid assets, and for the asset aggregation activity.
Nevertheless, these topics are in the FOs agendas for the near future. 43% of the interviewed Family Offices have never supported an initiative in a philanthropic activity and only 9% are involved in one on a recurring basis. The initiatives which are usually supported are those concerning health and poverty.
