Horizon Q3│2024 - Berenberg Insights

When does it make sense to set up a family office? What role does the development of an overall wealth strategy play as a starting point for the family office?

Having your own family office is naturally also associated with costs for asset management, accounting, controlling and reporting. Especially if external managers are employed, the costs must be in proportion to the assets under management and the targeted return. If, for example, assets of over EUR 200 million are available, it makes sense to set up a family office in order to be able to act completely independently.

The overall wealth strategy acts as a compass for the work of the family office. However, the development of a family strategy precedes the wealth strategy. This should define the company succession, a clear group of shareholders and the objectives to be pursued with the assets.

The next step is to define the overall asset strategy. The strategic asset allocation forms the foundation for this. It defines return targets, risk tolerances and liquidity requirements. Another element that is often fundamental for the next generation is the integration of specific sustainability criteria.

How do these customers typically invest?

We like to say: "If you know one family office, you know one." Every family office is unique and has its own focus and goals. That is also the exciting thing about our work. What most family offices have in common, however, is an entrepreneurial investment philosophy. Seizing opportunities and taking risks with the necessary foresight is in the DNA of family businesses and their family offices. A long investment horizon and broad diversification are always important in order to protect and increase assets in the long term.

The portfolio almost always includes public investments such as equities, bonds, commodities and externally managed investments, i.e. fund solutions. In addition, and this is what distinguishes single family offices from private investors, there is often a significant proportion of direct investments in the portfolio, in the form of company or property investments. We are currently also seeing family offices taking an anti-cyclical approach to property, i.e. using the low property valuations as an opportunity. The private debt asset class is also in high demand in the current high-interest rate environment.

What is special about Berenberg for this professional and high-net-worth client group and what services do family offices focus on?

Family offices particularly appreciate Berenberg's entrepreneurial business model. Berenberg shares the philosophy of an owner-managed company with the family offices. We offer our expertise and our network to entrepreneurial families who are thinking about setting up a family office. For existing family offices, we act as a sparring partner in the areas of wealth and asset management, investment banking and corporate banking. Many family offices do not have internal specialists in each of these areas. In addition to providing advice, we can also offer exciting investment products, be it in the equity, bond and multi-asset areas on the liquid side or private debt strategies for illiquid assets. Together with Berenberg Investmentbank, we also mediate between companies and family office investors in the search for new corporate investments.

What special challenges do you face regarding the individual requirements of clients and what added value can Berenberg offer here?

The heterogeneous landscape of family offices means that there is no "one-size-fits-all" approach. Advice in this area requires a high level of expertise, competence and understanding of the individual needs of clients.

Another challenge is that the single-family office sector is characterised by the utmost discretion. You have to know the landscape of business families well and know which family office is interested in which topics. We in the team have built up a large network in the family office sector and also offer family officers various events for dialogue. For example, with the annual Berenberg Single Family Office Conference, we have created one of the largest German-speaking networking platforms for family officers and wealth holders. In a protected environment, common challenges can be discussed, impulses for the future can be given and valuable synergies can be created.

What are the lessons learnt from the work of family offices for other wealthy clients? Can they invest similarly with Berenberg?

Even if you don't have your own family office, you should think about what goals you want to pursue with your assets in the long term and what you want to focus on. Berenberg advisors can also support private clients in developing an overall wealth strategy (SAA).

Private investors can act entrepreneurially in the asset classes and utilise temporary undervaluations as an opportunity. Bond funds, for example, are currently offering attractive yield opportunities again. Berenberg investment solutions in the form of asset management or investment funds are equally available to all wealthy clients, there are no differences. Direct investments in companies or property projects also offer good earnings opportunities, but are only possible with very large liquid assets. However, these asset classes are available to our semi-professional clients in the form of fund solutions. We offer our own Berenberg funds in the areas of private debt and property. Our cooperation with the private equity fund platform Moonfare makes it possible to participate in the development of this exciting asset class. In principle, all Berenberg clients have access to the bank's full range of services.