Family offices may surpass hedge funds, with $5.4 trillion by 2030

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

Family offices are expected to add more than $2 trillion in assets by 2030, as an increase in wealth concentration and a revolution in wealth management drive rapid growth in new family offices.

The number of single-family offices — the in-house investment and service firms of families typically worth $100 million or more — is expected to rise from 8,000 to 10,720 by 2030, according to a report from Deloitte Private. Their assets are expected to grow even faster, topping $5.4 trillion by 2030, up from $3.1 trillion today and more than doubling since 2019.

In total, the wealth of families with family offices is expected to top $9.5 trillion in 2030, according to the report — more than doubling over the decade.

“The growth has been explosive,” said Rebecca Gooch, global head of insights for Deloitte Private. “It’s really the past decade that has seen an acceleration in growth in family offices.”

The rise of family offices is remaking the wealth management industry and creating a powerful new force in the financial landscape. Projected to have more assets than hedge funds in the coming years, family offices have become the new stars of fundraising, with venture capital firms, private equity interests and private companies all competing to capture a slice of their rising wealth.

The growth is being driven by two broader economic forces. Increasingly, wealth is growing fastest at the top of the pyramid, as technology and globalization create winner-take-all markets and outsized rewards for tech entrepreneurs. The number of Americans worth $30 million or more grew 7.5% in 2023, to 90,700, while their fortunes surged to $7.4 trillion, according to CapGemini.

The population of centimillionaires — those worth $100 million or more — has more than doubled over the past 20 years to over 28,000, according to Henley & Partners and New World Wealth. There are now an estimated 2,700 billionaires in the world, according to Forbes, more than 2.5 times the number in 2010.

At the same time, the ultra-wealthy are changing the way they manage their investments and financial lives. Rather than handing over their fortunes to a single private bank or wealth management firm, today’s mega-wealthy are opting to create single-family offices to better represent their interests and long-term goals. Family offices are seen as offering more privacy, more customization and more tailored programs for the next generation of the family.

“They want a team that’s entirely dedicated to them, 24 hours a day,” Gooch said. “Not only with investing, but in all the different areas of their life.”

After the financial crisis, wealthy families also want advisors that represent the family’s best interests, rather than private bank or wealth management advisors incentivized by the need to sell product.

“There are some organizations that don’t have products to pitch, but a lot of them do,” said Eric Johnson, Deloitte’s private wealth leader and family office tax leader. “And, lo and behold, if you engage them, what you’re going to have to buy is kind of what they’re selling, which might not be the best for the family.” 

More than two-thirds of family offices have been created since 2000, according to Deloitte. The largest number (41%) were founded by the original wealth creators, while 30% serve the second generation (inheritors) and 19% serve the third generation.

North America is leading the family office revolution. Family office wealth in North America is expected to grow by 258% between 2019 and 2030, compared with 208% in the Asia-Pacific region. North America’s 3,180 single-family offices are expected to balloon to 4,190 by 2030, accounting for about 40% of the world’s total. Asia-Pacific has about 2,290 family offices today, expected to grow to 3,200 by 2030.

The total wealth held by families with family offices in North America has more than doubled since 2019, to $2.4 trillion. It’s expected to reach $4 trillion by 2030, according to Deloitte.

That $5 trillion pool of capital globally has touched off a feeding frenzy on Wall Street to help family offices manage their money. From Goldman Sachs and Morgan Stanley to UBS, J.P. Morgan Private Bank, Citi Private Bank, and myriad trust companies and multifamily offices, traditional wealth-management firms are poaching family office specialists and launching new family office teams to better target the growth.

Accounting firms, tax attorneys, consulting firms and tech companies are also waking up to the power of family offices, which can now more easily outsource parts of their business to keep costs lower.

“There is a whole new arena of companies that benefit from this ecosystem,” Gooch said.

As they expand in both size and number, family offices are also becoming more institutionalized. Rather than two- or three-person shops focused on basic portfolios and arranging family travel, today’s family offices are more like boutique investment firms. The average family office has a staff of 15 people managing $2 billion, according to Deloitte.

Family offices are also changing how they invest. Instead of the old-school 60-40 stock and bond portfolios, family offices are shifting their money to alternative assets, including private equity, venture capital, real estate and private credit.

Family offices now have 46% of their total portfolio in alternative investments, according to the J.P. Morgan Private Bank Global Family Office Report. The largest amount is in private equity, at 19%. Aside from investing in private equity funds, more family offices are doing direct deals, where they invest directly in a private company.

A survey by BNY Wealth found that 62% of family offices made at least six direct investments last year, and 71% plan to make the same number of direct deals this year.

Private equity giants like Blackstone, KKR and Carlyle are building out their private wealth teams to better target family offices. Deal-makers for private companies are also discovering family offices, which can buy equity stakes or entire companies. Since family offices have long time horizons, preferring to invest for decades or even generations, they’re seen as more “patient capital” compared with private equity firms or venture capital.

“Family offices can be very solid, strong partners to invest with,” Gooch said. “I think a lot of the private companies are very grateful for their long-term patient capital and their dedication to this space.”

To support their growing assets and responsibilities, family offices are on a hiring spree. Fully 40% of family offices plan to hire more staff this year, according to Deloitte. More than a third (36%) say they plan to increase the number of services they provide to the family, or increase the number of family members served. More than a third (34%) are also increasing their reliance on outsourcing, Deloitte notes.

Deloitte said the biggest trends for family offices in the coming years will be the continued move toward “institutionalization” — with more professional management, governance and technology. More than a quarter of family offices now have multiple “branches” to serve different parts of the family, often in other countries.

And with the great wealth transfer expected to shift trillions of dollars to spouses and the next generation, more women and inheritors will start running family offices in the coming years. The average age of family office principals in the Deloitte survey was 68 years old, and 4 in 10 family offices will go through a succession process in the next decade.

While women represent 10% of the wealth holders for those with $100 million or more, they control 15% of the world’s family offices, according to the survey.

“On a like-for-like basis with men, women are somewhat more likely to become the principal of the family office,” Gooch said. “Family offices can really focus on key stages of life, like retirement or legacy planning. And making sure the next generation is prepared.”