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Family offices double annual returns and reward top executives
25/09/2018 , Alexandra Newlove,

Family office chief executives received an average 11 percent base pay increase last year, taking home $333,000 in a year while portfolio returns more than doubled, a new study of over 300 ultra-high net worth families’ investment vehicles shows.

Chief investment officers’ average base salary in 2017 was $312,000 (up 14 percent year on year), while chief operating officers and chief financial officers where paid $211,000 and $200,000 respectively.

The Global Family Office Report 2018, produced by UBS and Campden Wealth, surveyed 311 family offices from around the world with average assets under management of $808 million.

Chief executives in Europe were the best-remunerated from a regional point of view, with an average base salary of $309,000 and a 52 percent bonus, taking total earnings to $469,000. Those in North America made $414,000, comprised of a $337,000 base and 23 percent average bonus. Those in Asia-Pacific and Emerging Markets made $389,000 and $312,000 respectively, inclusive of bonus. The average family office has 11 full-time and four part-time members of staff.

Approximately nine percent of chief executives and CIOs were female, though elsewhere in the C-Suite women were better represented, comprising 39 percent of COOs and 38 percent of CFOs, while 14 percent of offices said they had diversity targets in place. In 41 percent of family offices, a family member held the chief executive position, though it was less common to see family members in other C-Suite positions.

The salary bumps came in a year where the average family office portfolio returned 15.5 percent, compared to seven percent in 2016.

The accelerating performance was attributed to an ongoing global equities bull market, and a strong private equity (PE) sector.

The average global portfolio had 26 percent in global equities, 16 percent in fixed income, 17 percent in direct real estate, 14 percent direct private equity, eight percent in private equity, seven percent in cash, six percent in hedge funds, and the remainder a mix of commodities and other alternatives.

Sara Ferrari, head of global family office at UBS, said the surveyed families had delivered the strongest returns since the study began five years ago.

“This reflects the bull market, as well as family offices’ ability to take a long-term approach and embrace illiquidity,” Ms Ferrari said.

“For the first time since we have been analysing this data, Asia has led the way on performance, benefiting from a relatively high exposure to developing market equities and the high number of private equity deals in the region.”

Developed market equities were in fact the best performing asset class for family offices in 2017, returning 38 percent compared to the 23 percent from developed markets.

However, hefty exposure to developing market equities may hurt returns next year, with the MSCI Emerging Markets Index down more than 10 percent for 2018 to date.

The boom in the number of family office structures was evident in the report: 37 percent had been set up since 2010, 30 percent between 2000 and 2009, and 33 percent pre-2000.

Family offices servicing a single family made up 75 percent of participants, while the remainder were either private multi-family offices owned by the families (13 percent), or commercial family offices owned by third parties (12 percent).

More than 70 percent were expecting a generational wealth transfer in the next 15 years, though less than half had a succession plan in place.

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