Family matters, more than you reckoned

Whispered money, the stuff that passes between founders of companies and their children, is quietly taking over the world of finance. Family offices are in control of a chunk of capital that's chasing investment ideas among first-gen entrepreneurs. The world is witnessing the biggest intergenerational transfer of wealth in history to heirs who don't particularly fancy filling their parents' professional shoes. Governments are encouraging this form of wealth transfer by taxing it preferentially over other forms, as it facilitates entrepreneurship in a discreet, yet roundabout, manner. Family offices represent patient money in the world of venture capital, and this leads to outsized returns on investment through selection and perseverance. The investment phenomenon should intensify as more capital moves into hands of heirs who have often dramatically distant world views from their parents'.

Family offices are drawing sometimes unwanted attention in the financial markets due to their scale and pace of growth. These need to be managed to be able to deliver on the vision of their founders as well as expectations of beneficiaries. The job is complicated by the unusual investment horizon where inheritors will come into their money in a vastly altered economic landscape. Technology contributes to the complexity both by shifting the investment frontiers as well as affecting how family offices manage themselves. Yet, family offices have a unique strength in being set up by people who have run successful businesses and who should be able to ensure these are run efficiently.

The biggest concentration of wealth is funding the largest revolution of entrepreneurship by trying to keep it in the family. There has to be some historic irony in it.