Family Offices Like Archegos Take Big Risks Like Hedge Funds – The Wall Street Journal
Enormous losses at Archegos Capital Management have cast a rare spotlight on the growing influence of below-the-radar institutions around the globe called family offices.
These firms, which manage huge piles of wealth for individuals or families, are proving to be increasingly important to the financial system. Just 121 of the largest single-family offices represent an estimated net worth of $142.4 billion, according to a report last year by UBS Securities . Sixty-nine percent of these offices were established since 2000, the report found.
As they have grown in size, some family offices have embraced the riskier investment strategies used in previous decades by the most aggressive hedge funds. This is a departure from more traditional family office investments in stocks and bonds—as well as private equity and venture capital, which in recent years have become much more competitive.
The shift in behavior has raised concerns on Wall Street and may have contributed to last week’s liquidation in excess of $30 billion of positions held by Archegos and its banks. The family office Archegos manages the wealth of investor Bill Hwang.
“Hedge funds used to take on lots of risk and swing for the fences, but now it’s often family offices,” said Joseph W. Reilly Jr., chief executive of Circulus Group, a consultant to family offices based in Greenwich, Conn.