The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Sebastian Pellejero

NEW YORK, Sept 25 (Reuters Breakingviews) - The world’s wealthiest families are playing offense with their fortunes. Their private investment hubs—known as single-family offices—are growing in both size and number, potentially reaching $5.4 trillion in assets under management by 2030, says Deloitte. Even the elite have reason to feel class envy, though: within this group, a rarefied few at the top are pulling away, amassing firepower that rivals sovereign wealth funds and buyout shops. This new class of investor will exert increasing and opaque sway over the realm of private markets.

This recent wave of expansion starts from an already very large base. With Intelligence, which tracks just over 3,000 single-family offices, pegs the universe’s combined investable assets at $4.7 trillion, already around 8% of global pension assets. And because nea rly two-thirds were founded after 2000, many newer entrants aren’t yet captured in datasets, meaning this tally almost certainly understates their true scale.

Within this field, a stark divide is emerging. Offices juggling more than $1 billion in assets increasingly resemble mid-sized traditional asset managers, with nearly 30 staff on average, formal boards in 70% of cases, and chief investment officers commanding $900,000 pay packages, according to Morgan Stanley Private Wealth Management and Botoff Consulting. Below that threshold, thousands of smaller outfits lean on teams of fewer than ten people operating under patchy governance.

This is more than just a curiosity. At the biggest scales, these shops can make a huge impact. Just look at now-defunct Archegos Capital Management, once the $36 billion home of the fortune of Bill Hwang. It made a series of massively concentrated bets that wildly spiked the share prices of technology and media companies like Warner Bros. Discovery WBD.O. When the music stopped, the firm’s collapse inflicted about $10 billion of losses on its lenders, including the likes of Credit Suisse and Nomura. It evaded scrutiny until the decisive moment partly because of its use of derivatives, but also because family offices enjoy a light-touch regulatory regime, one that makes their operations relatively murky.

While Archegos sent shockwaves through public markets, most of its peers are eagerly jumping into so-called alternative investments unavailable to the unwashed masses. These account for 42% of the average portfolio, half of which is in private equity specifically, according to BlackRock BLK.N. But only the largest managers have the heft to find their own deals, rather than relying on others to cut them in. Billion-dollar offices can tap vast relationship networks, or even seed their own platforms. Michael Dell’s DFO Management, for example, was the first outside investor to back 5C Investment Partners, a private credit firm founded by former Goldman Sachs GS.N executives.

Upstarts lacking this depth must lean on co-investments, stakes in broader funds, and digital syndicates like Moonfare and iCapital. Nearly two-thirds of offices say they aim to complete six or more directly sourced deals a year, according to With Intelligence. In practice, direct holdings make up only 10% of assets. PwC estimates that around 60% of U.S. family office investments take the form of club deals, where several firms pool their capital to reach scale. Access is broader, but often at higher fees and on less favorable terms.

Despite these disadvantages, the path of least resistance is steadily becoming the default. Direct private equity deals generated average annual returns of 21% as of 2021, according to Royal Bank of Canada. Yet UBS finds family offices planning to cut direct allocations from 21% to 18% in favor of funds.

Buyout barons’ recent difficulties drumming up asset sales, and thus cash to return to investors, adds further pressure. Some $413 billion of portfolio company exits in 2024 represents barely over half of 2021’s peak, according to S&P Global. It is little wonder that the market for trading investors’ stakes in private equity funds hit a record $151 billion. As smaller offices buckle and cash out of their illiquid holdings, larger peers can scoop them up at a discount – last year, at about 89% of net asset value.

Higher-for-longer rates add another layer of sorting. Private credit, where loans typically charge a spread over a benchmark that has risen sharply, is the flavor of the day. Around 40% of single-family offices plan to increase exposure over the next year, according to Bank of New York Mellon BK.N. Scale again dictates entry point. The largest can lend directly or back platforms, keeping the full 10%-plus yields now available on senior loans. Smaller peers, confined to funds, see yields whittled down to around 8% after fees.

Even just securing staff is a challenge. Nearly 80% of family offices report hiring difficulties, and more than half worry about retention, according to multi-family office manager AlTi Global ALTI.O and industry researcher Campden Wealth. A third of family members tied to sub-$250 million offices are unhappy with how they’re run, compared with fewer than one in ten among billion-dollar peers. For professionals arriving from hedge funds or private equity, looser governance and family politics can be a shock.

Taken together, these pressures are producing a global hierarchy. From Hong Kong to Zurich, a small cohort of families now controls portfolios worth tens of billions apiece. The founding Walmart WMT.N family’s Walton Enterprises or Bill Gates's Cascade Investment loom large. In Switzerland alone, nearly 12% of family offices manage more than $5 billion each, says BNY Mellon. That gives them heft to syndicate capital, dictate terms, and bypass public markets entirely. Their clout is also reshaping the market for financial talent. In New York and London, recruiters now specialize in sourcing candidates specifically for wealthy families.

The same goes for an array of associated services. Outsourced chief investment officers now manage over $2 trillion, according to Cerulli Associates. Multi-family platforms such as AlTi Global and Rockefeller Capital Management are scaling quickly. Wealth-tech firms like Addepar and Canoe Intelligence are raising capital to build on their products for handling performance reporting and due diligence.

The outcome is a sharper concentration of both wealth and influence. The biggest family offices—rich in capital, talent, and networks—will increasingly shape the realm of private assets in ways that banks and regulators have not yet fully confronted. The divide at the top is between who is just wealthy, and who can move markets.

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CONTEXT NEWS

The number of family offices with allocations to private markets has surged by 524% since 2016, according to Preqin data. This surpasses the growth in private holdings among wealth management firms, endowments and foundations.

(Editing by Jonathan Guilford; Production by Maya Nandhini)

((For previous columns by the author, Reuters customers can click on PELLEJERO/ Sebastian.Pellejero@thomsonreuters.com))