重点关注家族理财办公室 Family Office Study 2023 Current challenges,investment trends and the growing importance of ESG criteria

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FamilyOfficeStudy2023

Currentchallenges,investmenttrendsandthegrowing

importanceofESGcriteria

January2024

2FamilyOfficeStudy2023

Inanutshell...

Executivesummary

Familyofficesarebecomingkeyplayersinthefinancialworld.Theyareincreasinglyinvolvedincapitalmarkettransactions-andthetrendisrising.Atthesametime,theyfacenumerousinternalandexternalchallenges.Inthewakeoftwopandemicyears,yetmoreupheavalhasbeendeliveredintheformofglobalsupplychainissuesandtheenergycrisis.Andthe

currentmarketenvironmentwithitshighinflation,risinginterestratesandrecessionary

developmentsaresignificantlyaddingtothepressure.

Giventhesechallengingcircumstances,familyofficesaretakingtheopportunitytoreadjusttheirassetallocation.Realestateandstocksaretheirmainfocus,andprivateequityisalsogrowinginrelevance.Currenttargetsectorsfortheirinvestmentsaremedicine&healthcareaswellasIT&digitalbusinessmodels.FamilyofficesarealsoplacinggreaterfocusonESGcriteriaintheirdecisionmakingandareincreasingtheirlevelofengagementthrough

impactinvesting.Besidescybersecurity,digitalization,processprofessionalizationandthe

shortageofworkforce,otherinternalchallengesincludetheneedtoestablishappropriate

structuresfortransferringthebusinesstothenextgenerationofthefamily.

ThesearethekeyfindingsofthelatestFamilyOfficeStudybyRolandBergerandWHU

basedontheviewsoffamilyofficesandmarketexpertsinOctober2023.

3FamilyOfficeStudy2023

Familyofficeshavemorechallengestoaddress

Currentchallenges

Theworldhasseentheriseofmultiplechallengesinrecentyearsandtheirimpactisbringingevergreaterpressuretobearonorganizationsacrosstheeconomy,includingfamilyoffices.Foraround86%offamilyoffices,risinginterestratesandthehigherprojectandfinancingcoststheybringcurrentlyrepresentthebiggestchallenge(2022:82%).Whiletheenergyandrawmaterialscrisiswasstilltopoftheagendalastyear(2022:89%),only47%ofrespondentscurrentlyconsiderthisamajorchallenge.Thatisbecausemanyhavegrownaccustomedtoitandhaveadaptedaccordingly. Thesameappliestogeopoliticalupheavals:Theirimportanceisdownsomewhatsincethe2022study.Buttheydoremainanimportantissuefor72%(2022:

83%)duetoongoinguncertaintiesaroundtheultimateoutcomeandhowlongthedisruptionmightlast.Theeconomyrepresentsafurtherchallengefor70%offamilyoffices,withgrowingsignsofaprolongedrecessionlooming.Familyofficeswillthereforeneedtopayincreasedattentiontowhichinvestmentscanbeconsideredattractiveevenduringarecession.

Althoughdevelopmentslikeadvancingdigitalization(50%;2022:47%)andclimatechange(42%;2022:41%)havegainedimportance,familyofficesarecurrentlyfocusingonoptimizingtheirassetallocationtoenablethemtocopewiththebiggestchallengesandminimizetherisks,whileatthesametimeexploitingtheopportunitiestheypresent.Only9%(2022:27%)viewtheimpactofthepandemicasasignificantorverysignificantchallenge.Otherpoliticalinfluencesarenowseenaslessofachallengeaswell(22%).

Keychallengesforfamilyofficesbyrelevance

(multipleresponsespossible)

Risinginterestrates

Geopolitical

upheavals

Recession

Digitalization

Energyandrawmaterialscrisis

Climatechange

Otherpoliticalinfluences

COVID-19

Veryinsignificant

Challengesconsideredsignificantorverysignificant

25%

61%

6%8%

22%

14%

14%

50%

6%

25%

14%

56%

8%

42%

8%

42%

39%

8%

17%

36%

3%25%31%36%6%

8%

14%

14%

64%

39%

50%

3%3%6%

InsignificantNeutralSignificantVerysignificant

Source:RolandBerger

4FamilyOfficeStudy2023

Readjustingassetallocationisthefocus

Relevantassetclassesforfamilyoffices

Thelowinterestrateenvironmentofrecentyearsmeantthatfamilyofficespredominantlykepttheirassetallocationstable.Thisisnowchangingforthemajorityofrespondents:almostallofthemwanttorealigntheirassetallocationsandadaptthemtothecurrentsituation.Realestateisgrowinginimportanceforfamilyoffices(92%;2022:88%),astheirstrongequitybaseoffersattractiveinvestmentopportunitiesgiventhehighinterestrates.

Alsogainingrelevancearestocks(92%;2022:89%)and,aboveall,privateequity(PE)investments.Fully89%ofrespondentsarealreadydirectlyinvestedincompanies,while86%havemadePEinvestmentsviafunds.Lookingforward,60%(2022:49%)plantochannelmoreoftheircapitalintodirectinvestmentsthroughprivateequity.PEinvestmentshavetheadvantageofenablingthefamilyofficetoactivelyinfluencethetarget,offeringafurtherbusinessdimension.

In2022,onlyaround40%offamilyofficesincreasedtheirleveloffixed-incomeinvestments.Withtheriseininterestrates,60%arecurrentlyplanningtoinvestmoreinbondsorotherfixed-incomesecurities.Preciousmetalssuchasgoldarealsobecomingincreasinglypopular(78%;2022:70%).Theadvantageoftheseisthattheycanofferstabilityeveninvolatilemarketsandareconsideredaneffectivewaytohedgeagainstinflation.Ontheotherhand,funds(78%)andventurecapitalinvestments(75%)arebecominglessimportant(2022:each82%).Only42%offamilyofficesconsidercryptoanddigitalassetsintheirinvestmentdecisions.

Shareoffamily

officesfor

whichthe

topicis

Familyoffices'activitiesandreadjustmentplans

inthedifferentassetclasses

Cash

Realestate

Stocks

Privateequity

(directinvestments)

Privateequity

(funds)

Fixed-income

investments

Preciousmetals

Funds

Venturecapital

(directinvestments)

Crypto&digital

assets

21%

12%

15%

6%

47%

3%21%55%18%3%

12%

58%

30%

28%

38%

22%

9%3%

6%3%48%32%10%

3%

3%

57%

37%

11%14%61%11%4%

32%

4%

14%

50%

22%7%37%26%7%

53%

20%

7%

20%

relevant

94%

92%

92%

89%

86%

83%

78%

78%

75%

42%

SignificantreductionReductionNochangeIncreaseSignificantincrease

Source:RolandBerger

5FamilyOfficeStudy2023

Familyofficesmakedirectinvestmentsincharacteristicways

Directinvestmentsinprivateequity

Anincreaseindirectinvestmentisatrendwealreadydescribedinourfirststudyin2021,anditcontinuestobereflectedinthefindingsofourlateststudy.Familyofficesareverymuchcharacterizedbyentrepreneurialfamiliesandtheirbusinessexperience.Byputtingcapitaldirectlyintocompaniesintheformofprivateequityinvestments,thefamilygainstheopportunitytobeinvolvedinbusinessprocesses,whetherthatisalongsiderunningtheirexistingfamilyfirmoraftersellingit.PEinvestmentsalsoofferopportunitiestoexertamoredirectinfluenceonacompanyandthusitsassets.

Toidentifysuitabletargets,afullanddetailedanalysisofthecompany'sbusinessmodel,marketandcompetitivesituationneedstobeconducted.Assumingapositiveoutcometotheduediligence,themajorityoffamilyofficesregularlydecidetogoaheadwiththeacquisition.ThefocustendstobeoncompanieswithannualrevenuesoflessthanEUR20million.OnethirdofthecompaniesacquiredbyfamilyofficesgenerateannualrevenuesofbetweenEUR21-50million,whileonly16%ofthebusinessestheypurchasereportannualrevenuesinexcessofEUR100million.

Around30%ofrespondentsinvestonlyorofteninthesameindustryorsectorastheirformerfamilybusiness.Bycontrast,40%neverorrarelydoso,astheyaremoreconcernedwithdiversifyingtheirportfolio.Thekeyrequirementsforcompanyacquisitionsarethattheycreatesynergiesandarecompatiblewiththeexistingportfolio.Potentialtargetsareprimarilyfoundthroughthefamilyoffice'snetworkandmandatedM&Aadvisors.

Shareoftargetsfromthesameindustry

asthefamilybusiness[%]

13%

22%

Always

Never

16%

Often

19%

Rarely

31%

Sometimes

Sizeoftargetsacquired

[revenueinEURmillion]

3%

10%

EUR301-500million

EUR101-300million

3%

EUR51-100

million

35%

EUR21-50million

48%

EUR0-20million

Source:RolandBerger

6FamilyOfficeStudy2023

Medicine&healthcareandIT&digitalbusinessmodelsarethetargetsectors

Investmentfocusforfamilyoffices

Tobetteraddresscurrentmarkettrendsandexploitinvestmentopportunities,familyofficesintendnotonlytoreadjusttheirassetallocationbutalsotomodifytheirinvestmentfocus.

For69%offamilyoffices,companiesfromthemedical&healthcaresectorarecurrentlytopoftheagenda(2022:66%).ThisismainlyduetoouragingsocietyandtheexperienceoftheCOVID-19pandemic.IT&digitalbusinessmodels,too,areconsideredincreasinglyattractive(67%;2022:64%).Digitalbusinessmodelsinparticularoffersubstantialpotentialduetothegrowingacceptanceamongendcustomers.Greentechnologies,ontheotherhand,havebecomelessimportant,nowconsideredrelevantbyonly50%ofrespondents.In2022,thisindustrywasstillinthetopspotat68%.Infrastructureandindustrialapplicationsareonlyattractivetoaroundathirdoffamilyoffices.Theincreasedinputandenergypricesplayabigpartinthat.Servicesandfinance&fintechsaretheleastpopularareasforinvestment.

Thetrendtowardsinvestingincompaniesdirectlythroughprivateequityisgrowinginimportance,especiallyinthefocusindustries.Besidesthehighpotentialforprofit,thefamily'sindividualinterestsintherespectiveindustriesalsoplayanincreasinglyimportantrole.

Focusedinvestmentareasforfamilyoffices

(multipleresponsespossible)

14%

69%

67%

50%

36%

33%

22%

Medicine&healthcare

IT&digital

businessmodels

Green

technologies

Infra-

structure

Industrial

applications

Services

Finance&

fintechs

Source:RolandBerger

Governance

7FamilyOfficeStudy2023

FamilyofficesareincreasinglyconsideringESGcriteriaintheirchoiceofassets

ImportanceofESGcriteriaforfamilyoffices

Thesignificanceofenvironmental,socialandgovernance(ESG)criteriaintheinvestmentdecisionsmadebyfamilyofficescontinuestorise.Environmentalfactorsinparticulararebeinggivenincreasingweight.For56%ofrespondents,resourcescarcityisanimportantaspecttoconsiderwhenselectingtheirassets.Andcarbonfootprintaswellaswaterconsumptionorwaterpollutionareconsideredby47%offamilyoffices.

Whenitcomestosocialissues,64%putemployeehealthandsafetytopofthelist.Fortwothirdsofrespondents,thetreatmentofemployeesisanaspecttheyconsidertobehighlyimportantwhenselectingtheirinvestments.Transparentsupplychainsareimportantfor41%.

Notleastduetotheheightenedlegalrequirements,afunctioningcompliancesystem(69%)andcom-prehensiveriskmanagement(64%)areparticularlyimportantforfamilyofficesintermsofgovernancefactors.Inaddition,63%ofrespondentsgiveethicalmanagementahighorveryhighweightingintheirinvestmentdecisions.Othergovernanceaspects,suchasthespecificcompositionofmanagement,arehighlyrelevantforjust21%offamilyoffices.

Shareoffamily

officesfor

whichthe

topicis

InfluenceofESGcriteriaontheselectionofpotentialassets

Environmental

Resourcescarcity

Carbonfootprint

Waterconsumption/pollution

Other

31%

50%

6%

8%6%

6%15%32%47%

35%

47%

9%9%

48%

33%

5%

10%5%

relevant

100%

94%

9

4%

58%

Social

Safety/health

Supplychain

transparency

OthersocialfactorsEmployeetreatment

Other

3%

33%

64%

33%

8%

6%

14%

39%

3%11%56%31%

3%

29%

6%

63%

6%6%65%24%

100%

100%

100%

97%

47%

58%

11%

6%

25%

10

0%

Compliance

3%6%28%50%14%

100%

Riskmanagement

43%

34%

3%

20%

9

7%

21%

71%

7%

3

9%

Ethicalmanagement

Other

VerylowLowNeutralHighVeryhigh

Source:RolandBerger

8FamilyOfficeStudy2023

Measuringactualimpactisthebiggestchallenge

Impactinvestingbyfamilyoffices

Investingforimpactisbecomingincreasinglysignificant.Foraroundhalfofthestudyrespondents,impactinvestingisnowimportantorveryimportant.Asaresult,moreandmorefamilyofficesareinvestinginbusinessesorareasthataddresssocialorenvironmentalchallengesandcreateadditionalbenefitsinadditiontogeneratingareturn.

Typicalsectorsincluderenewableenergies,organicfarming,educationandhealthcare.Intotal,47%ofrespondentsalwaysoroftenmeasuretheimpactoftheirinvestments.Theiraimistomaketheirinvestmentstrategymoresustainableandalsotomonitorandimprovetheirownimpactperformance.Itcanalsohelpthemoptimizetheprocessofselectingpotentiallyinterestinginvestments.

Measuringtheimpactofinvestmentscanthereforebeusedasanactivemanagementtool.Thatsaid,itisinmanycasesdifficulttomeasuretheactualimpact.Wherekeyperformanceindicatorsarecomplexormissing,therecanoftenbealackoftransparency,andthiscanreduceindividualstakeholders'acceptanceofsustainableinvestments.

Importanceofthenon-financialimpactofinvestments

8%

Unimportant

8%

Veryimportant

42%

Neutral

42%

Important

Frequencyofmeasuringtheimpactofinvestments

6%

Never

22%

Always

19%

Rarely

25%

Often

28%

Sometimes

Source:RolandBerger

9FamilyOfficeStudy2023

Familyofficesfaceadiverserangeofinternalchallenges

Organizationalandfamily-relatedchallenges

Lastyear,around20%offamilyofficesreviewedtheirinternalprocessesandprocedures.Cybersecurity,digitalizationandprofessionalizingthefamilyofficerepresentthebiggestorganizationalchallengesforover90%ofrespondents.Otherorganizationalchallengesincludeaccesstotalent(89%)andinternationalizingthefamilyoffice(56%).

Lookingattasksdirectlyconnectedtothefamily,78%offamilyofficesbelievethattheirgreatestchallengeistoputappropriatestructuresinplaceforthenextgenerationtotakeoverthebusiness,aswellastoensureadequateconsiderationofthefamily'sattitudetoriskinprocesseswithinthefamilyoffice(73%).Gettingthenextgenerationinvolvedinthebusinessatanearlystageisachallengefor72%ofrespondents.Sustainability(61%)andeffectivegovernancestructuresthatenablethefamilytohaveanactiveinfluenceaswellasco-determinationarealsoimportantfor56%.Refinancingthefamilybusinessislessrelevantforfamilyoffices(28%)owingtotheclearseparationbetweenthebusinessandthefamilymoney.

Internalchallengesforfamilyoffices

Organizational

challenges

Cybersecurity

Digitalization

Professionalization

Accesstotalent

Internationalization

Challengesconsideredimportantandveryimportant

8%

50%

42%

8%

53%

39%

28%

64%

3%6%

50%

39%

3%8%

3%

42%

14%

42%

Family-related

challenges

Structuresforbusiness

succession

Reflectingthefamily's

attitudetorisk

Integratingthenew

generation

Sustainability

Governancestructuresforco-determination

Refinancingthefamily

business

8%

36%

14%

42%

6%22%42%31%

28%

17%

44%

3%8%

6%

47%

14%

33%

3%

31%

25%

39%

25%19%28%14%14%

VeryunimportantUnimportantNeutralImportantVeryimportant

Source:RolandBerger

2

4

3

1

Source:RolandBerger

10FamilyOfficeStudy2023

FamilyOfficeStudy2023–Currentchallenges,investmenttrends

andthegrowingimportanceofESGcriteria

Keyfindings

Thebiggest

challengesforfamily

officesarehighinterest

rates,geopolitical

upheavalsandapossible

recession.

Privateequity

investmentsinmedicine

&healthcareandIT&

digitalbusinessmodels

arecurrentlykeytargets

forfamilyoffices.

ESGcriteriaare

becomingincreasingly

importantininvestment

decisions.Impactinvesting

isalsogainingrelevance

inthiscontext.

Currentinternal

challengesforfamily

officesarecybersecurity,

digitalization,

professionalizationand

accesstotalent.

Publisher

RolandBergerGmbH

Sederanger1

80538Munich

Germany

+49899230-0

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informationprovidedinthispublicationwithoutreceivingspecificprofessionaladvice.RolandBergerGmbH

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