In the face of an increasingly volatile environment, ultra-high net worth (UHNW) families in Asia and the rest of the world are seeking bespoke wealth solutions that can meet their increasingly complex and unique needs.
The answer for many has come in the form of single-family offices dedicated to managing the finances of established families. These entities have been estimated to manage more than US$6 trillion in funds, or more than the total handled by hedge funds globally.1
And, as Asia’s wealth creation story is still being written, such family offices—which typically cater to investors worth over US$100 million—are likely to gain even greater prominence. Experts argue that these entities offer the flexibility, balance sheets and long-term horizon to thrive even in a downturn.
“It’s hard for business owners or wealthy families to decipher everything that’s happening in the investment world on their own because it has become more uncertain partly due to a complicated global macro environment between inflation, currency volatility, energy supply and growth uncertainty. In the past these families would focus on equities and bonds, but as their understanding of long-term wealth management increases, many are starting to realize that they need to build a balanced portfolio with exposure to different asset classes to help them achieve their multi-generational financial goals,” says Ulysses Lau, Managing Director, Head of Investments and Advice for Hong Kong and the Philippines at J.P. Morgan.
“So, this shift in needs, coupled with the creation of new billionaires, has pushed up demand for single-family offices over the past few years.”
Meanwhile, with Asia preparing for a remarkable transfer of wealth to the next generation in the coming years, a younger set of investors are seeking more control over the way they manage their family fortunes; something a family office structure provides a platform for.
While family offices in some form have been around for centuries—indeed, J.P. Morgan has been an industry leader in serving the needs of ultra-high net worth families since its inception—today’s larger versions operate more like full-service global investment firms; trading not just traditional asset classes such as equities and fixed income, but also currencies, commodities as well as emerging asset classes such as digital assets.
Many also invest in real estate, private equity and venture capital funds, and even engage in their own private acquisitions and start-up deals. Such direct investments tend to provide family offices with better returns over the long run. It also gives business owners who have sold their enterprises a platform to lend their expertise to start-ups in an industry they are intimately familiar with.
“Single-family offices today are more sophisticated than ever before and tend to be a crossover private equity fund or a sovereign. Many have up to 100 to 150 financial experts, so they have institutional-level scale,” says Andrew L. Cohen, Executive Chairman of the Global Private Bank and a Global Chair of Investment Banking at J.P. Morgan.
Access to Institutional-Level Services
Global financial institutions such as J.P. Morgan have been helping their clients in the single-family office space for many decades by granting them access to the same level of service and expertise as their institutional clients.
“The needs of wealthy families today are very much institutional in nature, and they access all other lines of business within the J.P. Morgan franchise ranging from investment banking, corporate banking, asset management and risk management as well as custody and philanthropy services,” says Catherine Chin, Executive Director, Asia Head of Morgan Private Ventures at J.P. Morgan, who is responsible for providing institutional level access for the clients of J.P. Morgan.
The bank also facilitates the sharing of knowledge between its network of single-family offices around the world. “We are able to connect like-minded families and give them an avenue to share their thinking. This can range from sharing best practices for their family offices to exchanging thoughts on navigating volatile markets and the prospect of emerging risks given a backdrop of weaker global growth,” reveals Chin.
Aiding Philanthropic Commitment Amid Volatility
Having found success in the business world, more of Asia’s wealthy are now seeking to use their fortunes to make a positive social impact. J.P. Morgan leverages an endowment model of investing to help its single-family office clients meet their philanthropic commitments, regardless of how markets perform. An endowment model typically consists of a mix of traditional investments and alternative investments, such as hedge funds and private equity.
“For a traditional portfolio, it’s fine when there’s volatility in the markets because we look at it on a long-term basis. However, a family may have certain philanthropic commitments they need to fulfill every year, so we need to manage the portfolio differently so that it is able to generate enough returns to meet those commitments,” explains Lau.
To this end, J.P. Morgan’s Outsourced Chief Investment Office leverages expertise in endowment and alternative investments to help families to implement sophisticated one-of-a kind investment solutions designed to meet those goals.
A Bespoke, Global Partnership Model
J.P. Morgan’s commitment to single-family offices is best reflected in its establishment of a specialized offering known as 23 Wall; a reference to the bank’s original address on the corner of Wall Street and Broad Street in Lower Manhattan.
23 Wall is a specialized global team that provides the world’s largest and most sophisticated families with access to the firm’s overall intellectual capital, balance sheet, and deal flow around the world. The team engages with more than 700 families, representing over US$4.5 trillion in private family capital globally.
“At J.P. Morgan we’re constantly innovating and identifying solutions as well as leveraging intellectual capital across the firm that is valuable to families. Due to the size and sophistication of these families, we treat them as an institution. They have direct access to the investment bank (or another line of business) and 23 Wall acts as the connection between the two,” says Cohen.
23 Wall leverages J.P. Morgan’s comprehensive capabilities to ensure the power of the full J.P. Morgan Chase franchise is brought to bear for the benefit of the world’s largest families and their family offices.
“We understand that every client has different complexities and needs during different times of their wealth lifecycles. We have therefore built a team of global specialists with different capabilities and skills that are able to deliver seamless global coverage and facilitate access across every region to the relevant JPM experts,” says Natacha Minniti, Managing Director and Head of 23 Wall for Asia, Europe & the Middle East, and Latin America at J.P. Morgan.
CARRYING FORWARD THE BESPOKE BANKING LEGACY THROUGH A MODERN LENS
Andrew L. Cohen, Executive Chairman of the Global Private Bank and a Global Chair of Investment Banking at J.P. Morgan, talks about what makes the bank’s bespoke team, 23 Wall, relevant for today’s largest and most sophisticated families.
What was the motivation for setting up 23 Wall?
The name 23 Wall refers to the address of the original J.P. Morgan headquarters in New York. The name reflects the firm’s commitment to work with families today as we did originally—holistically across all lines of business as one firm and one responsibility to conduct “first-class business in a first-class way”.
We wanted to embrace the legacy of J.P. Morgan himself and subsequent generations who have continued to innovate—bringing us to 23 Wall today. Essentially, we have taken that historical context and reconceptualized this for the pressing needs of today’s accomplished families. We want to deliver the entirety of J.P. Morgan to the right families matched by their sophistication and the size of their assets. This means that we will treat our subset of sophisticated clients like institutions in terms of capabilities, intellectual capital and offering.
What are some of 23 Wall’s unique capabilities?
The purpose of 23 Wall is to help families navigate the firm for their personal, family office, and operating business needs. The beauty of our coverage model is that we have an unrivaled global network. First, we have members of our team on the ground in 6 countries and 12 cities. Second, we have access to our partners across lines of business and finally we are able to facilitate knowledge sharing between our network of single-family offices around the world. All of this ensures seamless global coverage at every level.
Additionally, we are focused on technology and enhancing processes via digital enhancements for our clients. The digitalization of the business enables a more effective way of interpreting data into intelligence, which in turn helps to determine what is needed to map a path to the client’s goals. So, we’re using our technology platforms not just for trading and execution, but for data aggregation and figuring out how to intelligently match the client’s goals with sophisticated, diversified opportunities they can only access at J.P. Morgan’s 23 Wall.
Can you provide an example of how 23 Wall supports the aspirations of its clients?
23 Wall’s unmatched advantage is in helping clients simultaneously navigate our solutions and capabilities across lines of business as well as across regions, which is the value of having a truly global team. A more recent and relevant example was during the height of Covid-19, when a large European industrialist family approached us as they had a position in a NASDAQ-listed stock that was held via their holding company based in Singapore. Due to the nature of the complex structure, the family required a unique derivatives transaction executed in New York. The family was based in Europe, the holding company was based in Singapore, and the transaction was completed in New York—a fully cross regional effort, which the team was able to seamlessly complete. This scenario showcases the power of 23 Wall’s seamless, global coverage model and experience.
What is your outlook for the growth of 23 Wall’s business?
The types of families we get referred to are typically well diversified and have underlying operating businesses that are continuing to prosper. However, as the market environment continues to change and as intergenerational wealth transfer takes place in the next decade, our clients/families’ investment preferences and goals will inevitably evolve. 23 Wall will be there to prepare them for that change, and we see a robust pipeline of demand from the largest, global families over the long-term.
1 Secretive family offices manage $6 trillion globally, more than hedge funds.
Available at: https://www.cnbc.com/video/2022/07/11/secretive-family-offices-manage-6-trillion-globally-more-than-hedge-funds.html
Date as of: 11 July 2022.
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