Various things come to mind when we think about how money is being managed by 0.001% at the top of the economy. One of these numerous images that come to mind is that of old fashioned private banks with marble lobbies and exquisite country houses to clients happy and comfortable. This, however, is no more the case as family offices are now being used by billionaires to invest wisely in the economy.
The functions of investment firms
The world of finance has been undergoing some transformation in the past few years as billionaires now prefer to bypass middlemen by creating numerous family offices that serve the function of investment firms. These family offices serve to constantly study the economy and roam the market searching for good investment opportunities to invest in. these family offices which many seem to ignore have proven to be very efficient in investments holding about $4,000,000,000,000 of assets. This is a figure more than the amount held by hedge funds and equal to 6% of the overall value of the world’s stock markets. Family offices in the economy are have been growing bigger by the year due to their large success, this has been bringing them some criticism though as some are of the opinion that it promotes inequality and concentrates power in one place.
Family offices are not as new as most people think and have been existing for long although not as popular as they are now. For instance, John D. Rockefeller set up a family office in 1882. Now, there are about 10,000 family offices spread out through America, Europe, and Asia. They function to manage financial assets, lobbies, take charge of most of the steps involved in investing and many other tasks depending on the size of the family offices and its workforce.
The expensive nature of family
Setting up family offices is a very expensive venture as it requires hiring lots and lots of experts on financial matters and other relevant fields. The expensive nature of family offices has made it so that only those worth over $100m which represents 0.001% of the world economy can afford to set it up. Examples of such people are Jack Ma of Alibaba and George Soros whose Western family offices oversee billions and compete with banks, displaying the strength of Wall Street firms. This is evident in the fact that some of these family offices have succeeded in buying whole companies.
Repeated cases of financial crises after the 1970s has made a lot of people lose faith in external money managers. What this has caused is a rise in the volume of family offices. However, this period of increase in the volume of family offices has been marked by a great increase in inequality as the amount of wealth owned by the top 0.01% of the economy has risen from 3% to 8% since 1980. Many swear that family offices are the cause of this situation but is this the case? As the number of new billionaires in the world keeps growing, many of the old ones are also looking to cash out thereby bringing about a lot of cash that would need investing and reinvesting respectively. The consequence of this is that there will be a rise in the need for family offices and