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The huge losses of Archegos Capital Management have cast a rare spotlight on the growing influence of under-the-radar institutions around the world called family offices.
These companies, which manage huge piles of wealth for individuals or families, are proving increasingly important to the financial system. According to a report released last year by UBS Securities, only 121 of the largest individual family offices have an estimated net worth of $ 142.4 billion. Sixty-nine percent of these offices have been established since 2000, according to the report.
As they grew, some family offices adopted the riskier investment strategies used in previous decades by the more aggressive hedge funds. This is a break with the more traditional family office investments in stocks and bonds, as well as in private equity and venture capital, which in recent years have become much more competitive.
The change in behavior has raised concerns on Wall Street and may have helped liquidate more than $ 30 billion in positions held by Archegos and its banks last week. The Archegos family office manages the wealth of investor Bill Hwang.
“It used to be that hedge funds would take a lot of risk and swing for fences, but now they are often family offices,” said Joseph W. Reilly Jr., Managing Director of Circulus Group, a Greenwich-based family office consultant. , Connecticut.
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