Wealth management firms catering to the rich are increasingly looking to invest in cryptocurrencies. According to Goldman Sachs Group, nearly half of the family offices they work with wish to add digital currencies to their investment portfolios. The bank reported that 15% of participants in a recent survey, which included responses from over 150 family offices worldwide, have already invested in cryptocurrencies. Another 45% expressed interest in entering this field as a hedge against "rising inflation, prolonged low rates, and other macroeconomic developments, following a year of unprecedented global monetary and fiscal stimulus."
**Secretive Firms**
The interest from family offices illustrates how these sometimes secretive entities, managing the affairs of the wealthy, are becoming a force across multiple markets. Among the firms that participated in the survey, 22% managed assets valued at $5 billion or more, while 45% oversaw amounts ranging from $1 billion to $4.9 billion. Some family offices have long been invested in private equity and real estate, but they have recently been major drivers of the SPAC (Special Purpose Acquisition Company) boom. Just as this phenomenon occurred, the cryptocurrency market frenzy last year attracted financial institutions, athletes, and celebrities. As the size and influence of family offices grow, critics are also pushing for more regulation, especially after the collapse of Bill Hwang's Archegos Capital Management, which caused banks billions in losses.
**Influential Technology**
Survey participants also indicated interest in investing in the "digital asset ecosystem." Mina Flynn, who helps lead private wealth management at Goldman Sachs, stated that "the majority of families want to talk to us about blockchain technology and digital ledgers... Many believe this technology will be as impactful as the internet in terms of efficiency and productivity." Other participants in the survey mentioned persistent fundamental concerns regarding the long-term value of digital currencies, despite the financial industry’s recent adoption of emerging encryption and blockchain technologies. Bitcoin, the largest cryptocurrency, has now fallen more than 50% from its record high near $65,000 in mid-April. Prices, which dropped below $30,000 for the first time in a month last Tuesday, are still over 230% higher than the previous year.
Family offices have proliferated throughout this century, partly due to the surge of billionaire wealth in the technology sector. More than 10,000 family offices worldwide manage the wealth of a single family, with at least half of them established this century, according to Ernst & Young. Research estimates from Campden Wealth suggest that the assets of family offices reached approximately $6 trillion globally by the end of 2019, larger than the entire hedge fund industry.
**Hidden Entities**
The firms vary significantly in size. Some manage hundreds of millions of dollars, while others oversee the fortunes of billionaires like Sergey Brin and Jeff Bezos. Many choose obscure names to operate away from public scrutiny. Brin's family office, Bayshore Global Management, derived its name from the location of the company’s headquarters. Charles and David Koch named their office 1888 in honor of the year their grandfather immigrated to America. The number of such offices has also increased throughout Asia following the wealth boom in the region, as both Chinese entrepreneur Jack Ma and real estate billionaire Wu Yajun established their own family offices in the past decade. At the same time, some wealthy individuals based outside Asia, including Ray Dalio, founder of Bridgewater Associates, are setting up branches of their family offices in the region.
