Companies that manage the wealth and personal affairs of the wealthy are increasingly looking to bet on cryptocurrency.According to Goldman Sachs Group, it has found that about half of its family offices want to add cryptocurrency to their portfolio.
The bank reported that 15% of respondents in a recent survey, which included responses from more than 150 family offices around the world, had already invested in cryptocurrency. Another 45% are interested in entering this field as a hedge against “high inflation, low long-term rates, and other macroeconomic developments, after a year of unprecedented global monetary and fiscal stimulus”.secret companies
The interest in family offices shows how these sometimes secretive businesses that run the affairs of the wealthy are becoming a force across multiple markets. Of the companies that participated in the survey, 22 percent had assets under management of $5 billion or more, and 45 percent had oversight of between $1 billion and $4.9 billion.
Some family offices have long invested in private equity and real estate, but they have recently been one of the biggest drivers of the boom in special purpose acquisitions, or “SPACs.” Just as with this phenomenon, the cryptocurrency market craze of the past year has attracted financial institutions, athletes, and celebrities. As the size and influence of family offices grow, critics are also pressing for more regulation, especially after the collapse of Bill Huang’s Archegos Capital Management, which caused banks to lose billions of dollars.
Survey respondents also indicated their interest in investing in the “dynamic ecosystem of digital assets.” “Most families want to talk to us about (blockchain) technology and digital records,” said Mina Flynn, who helps lead private wealth management at Goldman Sachs. “Many believe this technology will be as influential as the Internet in terms of efficiency and productivity.”
Other respondents indicated that they still have fundamental concerns about the long-term value of cryptocurrencies, despite the recent adoption of crypto and emerging “blockchain” technologies by the financial industry. Bitcoin, the largest cryptocurrency, is now down more than 50% from its record highs near $65,000 in mid-April.
Prices, which fell below $30,000 last Tuesday for the first time in a month, are still more than 230% higher than a year earlier.
Family offices have grown in popularity this century, in part due to the boom in technology billionaires. More than 10,000 family offices globally manage one family’s fortune, at least half of which began this century, according to Ernst & Young (EY).
Research firm Campden Wealth estimated that family office assets were worth about $6 trillion globally at the end of 2019, larger than the entire hedge fund industry.
Firms vary significantly in size. Some manage hundreds of millions of dollars, while others oversee the fortunes of billionaires such as Sergey Brin and Jeff Bezos. Many choose obscure names to operate away from the public eye. The Bren family’s office, Bayshore Global Management, owned by the founder of Alphabet, got its name from the location of the company’s headquarters. Charles and David Koch named their office 1888 after the year their grandfather immigrated to America.