Family office, the new CEO of family wealth

This article is part of the Newsletter #1 from the Chair in Family-Owned Enterprises (CFOE) at Esade and Andbank. Subscribe here.

What is a family office?

The concept of a family office, although increasingly defined and discussed in the specialized literature, still lacks a clearly delimited scope. Broadly speaking, a family office can be described as an organizational structure created to manage family wealth, which often includes the family business itself as well as philanthropic initiatives promoted by the family. 

There is no minimum threshold of wealth that dictates when such a structure should be created. It depends entirely on each family's circumstances. However, depending on the type of family office envisioned, the associated costs can be high. It is therefore essential to estimate the assets to be managed, the returns they are expected to generate, and the costs they can sustain. 

In this article, we will address three frequently asked questions about family offices: how they are structured, how families want to use their wealth, and how they invest it. 

How are family offices structured?

As mentioned above, there is no "magic number" that signals the moment to set up a family office to manage family wealth. 

It is very common to establish a family office after the sale of a family business

Some families begin building their wealth through a family business and, once the business has generated substantial profits, they decide to create a family office (usually through a new legal entity) to manage two primary areas: the family business (their main investment) and the wealth generated by its operations. This second area allows for investments that diversify the family’s portfolio—real estate, financial assets, businesses in other sectors, etc. Often, a third area is included—typically a foundation—to professionally manage philanthropic activity. 

It is also common for a family office to be established following the sale of the family business. At that point, many families opt for such structures to professionalize the management of the newly received wealth. The focus shifts from managing an operating business to managing a family fortune, which requires specific expertise and resources. 

How do families want to use their wealth?

When a family decides to establish a family office, a fundamental question must be asked: how do we want to use this wealth? Why do we want to be owners? While this may seem like a simple question, it is far from it. And the answer will determine how the family invests and how it interacts internally. Is the goal to maintain a certain lifestyle? To launch new ventures? To preserve wealth and pass it on to future generations? To donate it to philanthropic causes? 

This reflection is crucial and must be undertaken by each family individually. The answer will also determine the level of risk the family is willing to take. Once the motivation behind the preservation of wealth is clear, an investment strategy can be designed and a portfolio built to align with those goals. 

What do family offices invest in?

There is no universal answer, as each family office's investments depend on its specific circumstances and motivations. Nevertheless, certain trends can be identified based on various reports published by financial institutions. 

Globally

Several global reports analyze family offices managing between $100 million and $1 billion. According to these studies, the largest share of investments (between 35% and 45%) is held in liquid assets, primarily portfolios of publicly traded financial instruments. The second most significant investment (15% to 25%) is in private equity and venture capital. 

These figures reflect global trends, particularly in the United States, Asia, and Northern Europe—the most represented regions in such studies. This distinction is important, as notable differences emerge when we focus on Spain. 

In Spain

In Spain, there is a higher proportion of investment in real estate compared to other regions. Various sociological factors may explain this trend: a cultural appreciation for property ownership, attachment to the local area, limited geographic mobility, rental income, or even speculative motives. 

In Spain, real estate makes up a larger share of family office investments, with growing interest in alternative assets

Another clear difference in Spain’s family office asset allocation is the relatively lower investment in alternative assets. Although such investments have grown considerably over the past decade, they still lag behind global family offices. Just 15 years ago, investment in alternatives was minimal, but it has grown significantly since then. Low-interest-rate environment of recent years encouraged investors to explore new opportunities, prompting financial institutions to offer more attractive alternatives. 

Additionally, Spain’s private equity industry has expanded significantly over the past decade. There are now many more investment firms—both domestic and international—operating in the country, the latter increasingly establishing a presence in Spain. Meanwhile, investors have developed a greater understanding of these assets and have become more professional and sophisticated in managing them. 

A third common element in Spanish family office portfolios is direct stakes in companies. Many family offices are born from the sale of a family business, and that entrepreneurial spirit often remains. Families often seek to engage directly with businesses, both financially and by contributing management expertise. 

The future of the family office

Having explored these three questions, we can conclude that there is no single model for a family office. Each one depends on the specific needs and priorities of the family behind it. What is certain is that creating such a structure requires deep reflection and analysis—not just legal or tax planning, which is often the first thought—but a thorough discussion of the family's purpose, how they want to manage internal relationships to preserve wealth without creating conflict, and what legacy they want to leave to future generations. 

Ultimately, building a family office goes beyond the economic side—it’s about laying the foundations to pass on a promising future to the next generation.