Although the term ‘family office’ was coined in the United States, the notion of generic offices or gatekeepers dates back to Europe. According to an EY guide, European family offices originated in the sixth century, ‘when a king’s steward was responsible for managing royal wealth.’ After that, the rest of the aristocracy adopted the practice, creating the concept of stewardship, or what we call governance today.
Beyond aristocracy, during the Renaissance era, wealthy families formed private offices to manage their finances and patronise the arts. The most notable is the House of Medici, established in the 15th century. The Medici family were of Italian descent. They went from being successful wool merchants to a banking and political dynasty renowned all around Europe then.
European family office landscape
Investment opportunities
Europe offers a broad and robust investment landscape. It promotes access to diverse investment opportunities, including private equity, venture capital, and sustainable investments. The United Kingdom is home to Europe’s fastest-growing tech hub. Zuckerberg’s family office, Iconiq, recently opened an office in London. The firm is positioning itself to capture VC deals for growth-stage tech start-ups in the region.
Ease of doing business
Most European countries have well-established regulatory frameworks that make conducting business easy for family offices. The continent also has a high number of talented and skilled professionals and is home to some of the best financial institutions in the world. In 2022, PWC listed five European countries in a global location guide for the best places for family offices. It included Germany, Luxembourg, the UK, Austria and The Netherlands.
Stable economy
Despite the Russian-Ukraine war, most European countries still demonstrate economic stability. Six of the top 10 countries for the 2022 World Competitive Index were European. Denmark topped the economic competitiveness ranking because of its environmental sustainability. Other high-ranking countries include Switzerland, Sweden, the Netherlands, Finland, and Norway.
Current family office trends in Europe
The war in Ukraine nearly brought Europe to its knees in 2022. Committed to the Paris Agreement, the continent struggled with high inflation brought on by increasing prices of fuel and food costs.
However, not strangers to war or trying circumstances, family offices in the region are adapting to deal with the challenging economic circumstances. Despite the uncertain circumstances, Europe is home to 23% of the billionaires listed in the Forbes World Billionaires List 2022. Furthermore, the number of billionaires has climbed by 80% since 2016. That indicates plenty of wealth creation despite the region’s economic challenges.
A Campden Wealth report released earlier this year shows that European family offices are adopting new strategies to preserve their wealth and legacy. A majority (68%) cited that risk management was their top priority for the next 12-24 months. As a result of setbacks experienced in financial markets earlier in the year, firms opted for more exposure to private equity investments. Furthermore, popular strategies for mitigating the adverse impact of inflation on investment performance included increasing exposure to equities (49%), real estate (33%), commodities (33%) and reducing the duration of bond portfolios (28%)
In conclusion, while the term ‘family office; may have originated in the United States, the concept of private offices or gatekeepers can be traced back to Europe. European family offices have a long history, with roots in aristocratic stewardship and Renaissance-era wealth management. The European family office landscape remains ripe with investment opportunities, ease of doing business, and a stable economy.
Despite economic challenges, such as the Russian-Ukraine war and inflationary pressures, Europe continues to be home to a significant number of billionaires, indicating ongoing wealth creation in the region. And European family offices European continue adapting and evolving to preserve their wealth and legacy.
