A Family Affair: Embracing AI in a Changing World
Citi Institute recently caught up with Hannes Hofmann, Head of Global Family Office Group, Citi Private Bank, to discuss key trends impacting family offices, ranging from geopolitics and artificial intelligence to philanthropy and art.
What are the characteristics of the global family office market?
Family offices are established by wealthy families to manage their diverse needs. They often provide services ranging from investment management, accounting, tax, and even administrative services and lifestyle management. They may also provide families with advice on philanthropy and charitable giving and be involved in corporate and investment banking transactions concerning the operating business or direct investments.
There are over 8,0001 single-family offices worldwide . The families they service typically have assets worth more than $500 million. The offices own operating businesses and hold investments in private equity, private credit, real estate and direct investments, as well as endowment-style public market portfolios. Over the past years, they have become sizable market participants and Deloitte estimates that family offices globally have $3.1 trillion in assets under management, which is expected to rise to $5.4 trillion in 20302. Citi works with 1,800 family offices with an average net worth of $2.4 billion. We work with some family offices that have hundreds of employees working for a handful of family members, and some that service 1,600 members of the same family. The average family office has less than seven employees and outsources many of its services.
How do geopolitics affect your clients?
Our data shows that 70% of families who have family offices are active in more than one continent – the majority have passports, investment assets, operating companies, or family members in more than one region. If they anticipate something could go awry in one region (such as war or asset controls), they have the ability to diversify into another region as a secondary location for personal and asset safety.
But that begs the question of which regions to choose for such diversification strategies. Citi Private Bank published a whitepaper ‘Asset Location and Global Mobility3 last September. In it, we outlined a framework to evaluate where they want to be located. The four pillars are lifestyle, tax, stability and predictability of the political and legal system, and resources (talent and infrastructure).
How do family offices view artificial intelligence?
AI seems to be different from previous technological innovations. Citi’s 2024 Global Family Office Survey found that 80% of respondents indicated they have either invested in AI or want to4. Family offices are accessing the sector through private and public markets, which enables them to invest into the full AI lifecycle and ecosystem.
There is no doubt that artificial intelligence (AI) will fundamentally change the way we work and live.
The pervasiveness of the technology leads to broader themes that we are currently discussing with clients, such as energy (nuclear, alternatives and fossil fuels), deep tech, fintech, education, and healthcare.
How do family offices differ from other investors?
Large family offices with more than $500 million in assets think multi-generationally. They invest for the next hundred years rather than the next quarter. Correspondingly, their asset allocation typically has a higher weighting toward alternatives and illiquid assets than other investors.
In that way, they function more like a sovereign wealth fund or a university endowment. A typical private investor allocates about 25% to private equity and private credit. For the average family office that we work with, the allocation to illiquid assets – private equity, private credit, and direct investments in real estate – is somewhere between 40% and 55%.
Again, it has to do with their long-term horizon. On the one hand that is important because over the last 20 years alternative assets have driven investment returns. On the other hand, a lot of the investment themes such as healthcare, energy, and fintech are only accessible in the private markets. In that way family offices can act as a catalyst in transforming today’s economy into the AI-driven economy of the future.
Your team also offers advice on philanthropic giving and art?
Many wealthy families believe that with success comes the responsibility to give back. Historically, philanthropy by wealthy families was about giving money to a cause they support and expecting to see the donor’s name on, say, a building in return. Increasingly, modern philanthropy is about effectiveness. It is important to spend time with clients to help them determine what their philanthropic goals are and how they can ensure their donation money is used effectively. This is especially important among the younger generation, which is increasingly impact-oriented.
1 Deloitte, Defining the Family Office Landscape 2024
2 Deloitte, Defining the Family Office Landscape, 2024
3 Citi Private Bank, Asset Location & global mobility, Challenges and strategies for global families, 2024
4 Citi Private Bank, Global Family Office 2024 Survey Insights
Hannes Hofmann, Head of Global Family Office Group, Citi Private Bank
Hannes Hofmann is a Managing Director at Citi Private Bank and Head of the Global Family Office Group.
Citi Private Bank’s Global Family Office Group serves over 1800 single family offices, private investment companies and private holding companies, including family-owned enterprises and foundations, around the world. The team offers clients comprehensive private banking and family office advisory services, institutional access to global opportunities, and connections to a community of like-minded peers. Hannes has an extensive global institutional wealth background.
He joined Citi from J.P. Morgan where he spent over 20 years in numerous roles globally. Most recently, Hannes was the Head of Multifamily Office and Intermediaries for the Asia Pacific, Europe, Middle East & Africa, and Latin America regions. P
Previously, Hannes was Head of the Global Investment Opportunities Group in Asia, where he led teams in Singapore and Hong Kong that provided investment advice to sophisticated, trading-oriented clients in J.P. Morgan Private Bank Asia.
He was also the Head of Investments in the U.S. Southeast region at J.P. Morgan. Hannes holds an MBA from Stanford University, a Master’s degree from CEMS/London School of Economics, a Master's degree from the Vienna University of Business and Economics, as well as the Chartered Financial Analyst (CFA) designation. He is a former board member of the Wolfsonian Institute in Miami.
