By 2030, hedge funds will be surpassed by family offices, which will have a total of $5.4 trillion in assets.

• According to Deloitte Private, the number of single-family offices, which are in-house investment and service firms of families with a net worth of $100 million or more, is projected to increase from 8,000 to 10,720 by 2030.
• By 2030, it is predicted that they will surpass hedge funds in assets, with a projected total of $5.4 trillion.
• Next-generation families view family offices as providing greater privacy, personalized services, and customized programs.

The original article was published in CNBC's Inside Wealth newsletter with Robert Frank, providing a weekly guide for high-net-worth investors and consumers. To receive future editions, subscribe and have them delivered directly to your email inbox.

By 2030, family offices are predicted to increase their assets by more than $2 trillion due to the rise in wealth concentration and advancements in wealth management, resulting in rapid growth.

The number of single-family offices, which are in-house investment and service firms of families with a net worth of $100 million or more, is projected to increase from 8,000 to 10,720 by 2030, according to a report from Deloitte Private. Additionally, their assets are expected to grow at a faster rate, reaching $5.4 trillion by 2030, up from $3.1 trillion today and more than doubling since 2019.

The report predicts that the wealth of families with family offices will surpass $9.5 trillion by 2030, which is more than double the amount from a decade ago.

"Family office growth has accelerated over the past decade, according to Rebecca Gooch, global head of insights for Deloitte Private."

Family offices are transforming the wealth management industry and emerging as a dominant force in the financial sector, with projections indicating that they will surpass hedge funds in assets in the near future. As a result, family offices have become highly sought after by venture capital firms, private equity interests, and private companies looking to tap into their growing wealth.

The growth in wealth is being driven by two broader economic forces. As technology and globalization create winner-take-all markets and outsized rewards for tech entrepreneurs, the number of Americans worth $30 million or more grew 7.5% in 2023, to 90,700, while their fortunes surged to $7.4 trillion, according to CapGemini.

Over the past 20 years, the number of centimillionaires has more than doubled to over 28,000, while the number of billionaires has increased by more than 2.5 times to 2,700, according to various sources.

The ultra-wealthy are increasingly choosing to establish single-family offices to manage their investments and financial lives, rather than relying on a single private bank or wealth management firm. These family offices provide greater privacy, customization, and tailored programs for the next generation of the family.

"Gooch stated that the team they desire is one that is fully committed to them, available around the clock, not just for investing, but also for all aspects of their life."

In the aftermath of the financial crisis, wealthy families are increasingly seeking advisors who prioritize their family's interests, rather than private-bank or wealth-management advisors driven by the need to sell products.

"Eric Johnson, Deloitte's private wealth leader and family office tax leader, stated that some organizations lack products to pitch, but many do have them. He added that engaging with these organizations may require purchasing what they are selling, which may not be ideal for families."

Since 2000, more than two-thirds of family offices have been established, with the largest number (41%) created by the original wealth creators, 30% serving the second generation (inheritors), and 19% serving the third generation, according to Deloitte.

The family office revolution is being led by North America, with family office wealth in the region expected to increase by 258% between 2019 and 2030, compared to 208% in the Asia Pacific region. By 2030, North America's 3,180 single-family offices are projected to grow to 4,190, accounting for approximately 40% of the world's total. In contrast, the Asia Pacific region currently has about 2,290 family offices, which are expected to increase to 3,200 by 2030.

Since 2019, the total wealth held by families with family offices in North America has more than doubled to $2.4 trillion. It is predicted that this wealth will reach $4 trillion by 2030, according to Deloitte.

Family offices worldwide are experiencing a surge in demand for wealth management services, prompting a feeding frenzy on Wall Street. In response, traditional wealth-management firms are hiring family-office specialists and launching new family-office teams to better cater to this growing market. Among the firms leading the charge are Goldman Sachs, Morgan Stanley, UBS, J.P. Morgan Private Bank, Citibank Private Bank, and numerous trust companies and multifamily offices.

Family offices are increasingly being recognized by accounting firms, tax attorneys, consulting firms, and tech companies as a cost-effective solution for outsourcing certain business functions.

Gooch stated that a new category of businesses can profit from this environment.

Family offices are becoming more institutionalized as they grow in size and number, with an average staff of 15 people managing $2 billion, according to Deloitte.

Family offices are increasingly moving away from traditional 60-40 stock and bond portfolios and are instead investing in alternative assets such as private equity, venture capital, real estate, and private credit.

According to the J.P. Morgan Private Bank Global Family Office Report, family offices now have 46% of their total portfolio invested in alternative investments, with private equity being the largest investment at 19%. Additionally, family offices are increasingly engaging in direct deals, where they invest directly in private companies.

According to a survey by BNY Mellon Wealth Management, 62% of family offices made at least six direct investments last year, and 71% plan to make the same number of direct deals this year.

Private equity firms such as Blackstone, KKR, and Carlyle are expanding their private wealth teams to better target family offices. Deal-makers for private companies are also discovering family offices, which can purchase equity stakes or entire companies. Family offices, with their long-term investment horizons, are viewed as "patient capital" compared to private equity firms or venture capital.

"Family offices are valuable, steadfast investment partners," Gooch stated. "Many private companies appreciate their long-term, patient capital and commitment to the industry."

Family offices are experiencing growth and are therefore increasing their staffing levels. According to Deloitte, 40% of family offices plan to hire more staff this year, while 36% plan to increase the number of services they provide to the family or the number of family members served. Additionally, 34% of family offices are increasing their reliance on outsourcing, Deloitte reports.

Family offices will see a growing trend towards institutionalization in the coming years, with more emphasis on professional management, governance, and technology. Over 25% of family offices currently have multiple branches to cater to different family members in various locations.

With the upcoming Great Wealth Transfer, more women and inheritors will take on leadership roles in family offices. According to a Deloitte survey, the average age of family office principals is currently 68 years old, and about 40% of family offices will undergo a succession process in the next decade.

Despite comprising only 10% of the wealth-holders with $100 million or more, women control 15% of the world's family offices, according to the survey.

"Women are slightly more likely to become the principal of a family office on a par with men, according to Gooch. Family offices can concentrate on critical life stages, such as retirement planning or legacy preparation, and ensuring the next generation is adequately prepared."