Companies that manage the wealth and personal affairs of the rich are increasingly looking to invest in cryptocurrencies.
That's according to Goldman Sachs Group Inc., which found that nearly half of the family offices it does business with want to add digital currencies to their investment stability. Family offices are private companies that handle investments and wealth management for wealthy families.
The bank said 15% of respondents to a recent survey – which included responses from more than 150 family offices around the world – are already investing in cryptocurrencies. Another 45% would be interested in diving into space as a hedge against "higher inflation, prolonged low rates and other macroeconomic developments after a year of unprecedented global fiscal and monetary stimulus."
The interest of family offices shows how these sometimes secretive companies that run the affairs of the wealthy are becoming a force in various markets. Of the companies that participated in the survey, 22 percent had assets under management of $5 billion or more, and 45 percent oversaw $1-4.9 billion.
Some family offices have long been private equity and real estate investors, but have recently been one of the biggest drivers of the boom in special purpose acquisition companies, or SPACs. As well as this phenomenon, last year's crypto-market frenzy attracted major financial institutions as well as athletes and celebrities.
Survey respondents also indicated interest in investing in the “digital asset ecosystem”. Most families want to talk to us “about blockchain technology and digital accounting,” said Meena Flynn, who helps lead Goldman's private wealth management. Many think that "this technology will have as much impact as the Internet in terms of efficiency and productivity."
Other survey respondents, however, indicated that they still had underlying concerns about the long-term value of digital currencies despite the latest adoption of emerging blockchain technologies from the financial industry. Bitcoin, for example, is now more than 50% below its record levels of around $65,000 in mid-April. Prices, which on Tuesday dropped below $30,000 for the first time in a month, are still 230% positive from a year earlier.
Family offices have proliferated this century, in part because of the billionaire boom in technology. More than 10,000 family offices manage the wealth of a single family, with at least half starting this century, according to EY. A 2019 estimate by researcher Campden Wealth valued family office assets at nearly $6 trillion worldwide, higher than the entire hedge fund industry.
Companies vary widely in size. Some manage hundreds of millions of dollars, while others oversee the fortunes of multimillionaires like Sergey Brin and Jeff Bezos. Many choose obscure names to operate out of the public eye. The family office of Alphabet Inc. Brin founder, Bayshore Global Management, is named after the location of the company's headquarters. Charles and David Koch named theirs after the year their grandfather emigrated to America: 1888.
They have also increased in numbers across Asia following the wealth boom of the region's ultra-rich, with Chinese Jack Ma and real estate billionaire Wu Yajun establishing their own family offices over the past decade. Meanwhile, members of the ultra-rich based outside Asia, including Bridgewater Associates founder Ray Dalio, are increasingly opening branches from their family offices.
Is the increased interest in bitcoin and cryptocurrencies from family offices just a passing wave or a new trend? Leave your comment below.