The Same but Different

Asserting the Family Office concept should remain universal but attuned to their charges and generational differences when planning succession, Rajiv Garg Co-Founder & Managing Director of Farro Capital also notes changing investment trends and the current challenge talent acquisition for this sector in the region

What is your definition of a Family Office in the Middle East?

We believe that the definition of a Family Office should remain the same regardless of region. Having said that, we would note that family offices generally follow the unique characteristics of the Families they serve. From our perspective, we define a family office as an organisation with an institutional character that can understand and navigate the nuances of family dynamics, thereby preserving and growing the legacy and wealth of the Family.

What are the current needs and challenges of family offices operating in the region?

The concept of a Family Office is relatively new in the Middle East and is closely tied to the mass creation of wealth in the region, which has primarily happened in the last few decades.

Hence, there is not enough clarity on the current needs and challenges of Family Offices in the region. On the overall, we have identified three main challenges:

Cost, especially for small and midsized family offices, as the fixed overheads as a percentage of the total AUM could come up to be

Talent acquisition and retention in amily offices. Historically, family office jobs were considered as positions for retirement resulting in most professionals being reluctant to work in such organisations due to the lack of perceived career growth. On top of that, it is also challenging to secure the right set of professionals to work or to advise the families for their long-term financial goals while mirroring their values, purpose and aspirations. Scale of services for family offices, t all family offices can hire for

For Single Family Offices (SFOs) struggling with wealth management recruitment, talent retention and scaling up, multi-family offices like Farro Capital can step in to fill the gaps and mitigate obstacles. While SFOs are usually hesitant to merge with other SFOs due to interpersonal issues, multi-family offices provide an attractive alternative allowing the families can access comprehensive wealth management services without the need for consolidation. This allows them to benefit from the expertise and resources of a professional organisation while maintaining

Rajiv Garg, Co-Founder & Managing Director of Farro Capital

Approximately only a quarter of the regions’ HNWIs have adequate succession planning. Are Family offices addressing this concern?

Ideally, Family Offices should possess the necessary resources and expertise to effectively handle succession planning for High-Net-Worth Individuals (HNWIs). But ironically, not all Family Offices have the depth of understanding regarding this complex process. As a result, they may either they fail to address the concerns adequately, or they come up with suboptimal outcomes.

Based on our experience, there are prominent differences between the wealth creators and the next generation who will inherit the wealth. Firstly, the older generation tend to be more handson when it comes to managing the family wealth or even the family businesses, compared to the next generation. Secondly, the next generation is likely to have different approaches or interests. They may be more inclined to explore newer technologies and asset classes such as artificial intelligence and the metaverse. While the older generation prefers to keep investing and philanthropy separate, we are seeing the succeeding generation pursue active interest in sustainable and impact investing. This is primarily because, on average, they are much better educated and tend to have a stronger stance on social and environmental issues.

We firmly believe that succession planning for families should not follow a one-size-fits-all approach. At Farro Capital, we commit substantial time and resources to ensure we obtain a 360-degree view of our clients’ needs. With each client, we strive to gain an in-depth understanding of the family’s values, their desired unique legacy and their long-term objectives. This process involves considering various factors, including understanding every family member’s unique needs and concerns, assembling a team of trusted advisors with the right expertise, and giving the family access to the right network and pool of information to make informed decisions to grow and protect their family wealth and legacy. The outcome we are aiming for is to meet their present needs while also capture new and long-term opportunities. By doing so, we ensure these decisions align with the family and business’ evolving values, purpose, aspirations and legacy.

Strategic Asset Allocations, by definition, are meant for long term. In an era of low interest rates and easy money supply, valuations had reached obscene levels, resulting in a correction in broader

We are also witnessing increased investments into clean energy. Countries lacking fossil fuel resources, as a result of geographical constraints, are in the process of massively ramping up their renewable energy capacities. However, we believe this shift is driven by concerns related to energy security, rather than solely being motivated by climate change considerations.

We have witnessed the previous dominance of software, which is now giving way to artificial intelligence (AI) overtaking software itself. Many of the Family Office forums we participated markets to more reasonable levels. From our perspective, the core allocation has not changed much. However, we have tactically increased our allocation to high grade fixed income and also added duration. At the same time, we have also increased our allocation to alternatives, primarily hedge funds and select venture funds.

We have already seen the impact of geopolitics on certain key markets and we do not anticipate that this trend will be reversing any time soon.

in, as well as industry conversations featured discussions on AI and how it is changing the world order. This includes its impact on the operational and investment aspects of Family Offices.

The essence of a Family Office, which revolves around managing the family dynamics, remains rooted in emotional intelligence (EI), an area where technology and AI still have a long way to go. That said, the rapid advancement of technology and the continuous stream of innovation certainly have had a profound impact on family offices’ approach towards investment strategics, operational processes, talent recruitment and decisionmaking capabilities.