Business

Where is my family office?

After filing tax returns in two countries, reviewing pensions and investments and still making little dent in a forbidding pile of paperwork, I have come to a major decision: I need a family office

True, my assets are slightly below the $100m or so that is considered a reasonable minimum but I have realised this is an artificial barrier. Archegos Capital Management proved that the world’s leading investment banks are perfectly happy to provide giant amounts of financing to a family office, however implausible.

If Credit Suisse will give Archegos’s founder Bill Hwang leverage of 5:1 on a bunch of ropey media stocks, I expect far more debt to back my much safer choice of index trackers. Last year an S&P 500 ETF made an 18 per cent return. Juiced with massive amounts of borrowing, this is enough to pay the family office bills. These will be extensive because I want all the services.

A hundred years ago the Bessemer Trust, set up to invest the wealth of the Phipps family, provided not only investments but dog walking, maids and a private train to shuttle family members between New York and Florida. In the 1960s, the Rockefeller family office would handle tax preparation but also take care of home insurance and buying cars. 

While there is a lot to be said for “democratising finance” and providing low-cost investment services for the “mass affluent”, it is only the family office that offers this one-stop shop.

Mine will need a good name. The Rockefellers coolly selected “Room 5600”, the office’s location in the family’s eponymous building in midtown Manhattan. Bessemer borrowed its name from a process for making steel, the industry that made the Phippses rich. Iconiq, the family office that manages the fortunes of tech billionaires including Mark Zuckerberg, sounds like it took its cue from an iffy aftershave brand.

For most family offices, it hardly matters. With no need to attract outside investors, they can dispense with branding consultants. But those with no real wealth, like me, or a dodgy track record, like Hwang, need something that fuels the illusion of solidity to lure bankers and staff.

Hwang made the inspired choice of “Archegos” — weighty, spiritual, a reference to Christ. Some say Jesus wasn’t a finance guy. There is the Parable of the Talents, which encourages investment, but it has little to say about total return swaps.

Family offices are not immune to strife. Beyond the multi-billion dollar blow-up at Archegos, there have also been allegations of sexual harassment and assault at Iconiq. But the more humdrum question is whether a family office can remove all financial headaches and whether it is a price worth paying.

Taking too great an interest defeats the purpose. After selling his business, software entrepreneur Peter Norton set up a family office in Santa Monica close to two cinemas, where he hoped to spend his afternoons. “But the reality is that I work a solid day, and then half of the evening after my wife goes to sleep, dealing with what the French like to call affaires,” he told the Los Angeles Times in 1994.

But step back too much and you start to worry about what is going on. Room 5600 had a staff of 200 and priceless art on the walls. In 1972, a younger generation queried both the $6m running costs and investments in apartheid South Africa.

Some of them also came to rue being “infantilised”, according to a 1976 book on the clan, which quoted a family member complaining that certain relatives would “always be calling up Room 5600 and saying, ‘I’ve lost my dog, what shall I do?’ or ‘I need a new refrigerator, how do I go about getting one?’”

I can see the potential problems with this but, just to be sure, I’d like to experience it first.


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