University of Chicago Business School booth.
Provided by: University of Chicago Booth School of Business.
A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future editions directly to your inbox.
Top universities are embracing the family office boom, with an increasing number of programs and courses aimed at preparing the next generation of family office leaders.
Last week, the University of Chicago Booth School of Business launched the Booth Family Office Initiative, a combination of research programs, courses and summits aimed at current and future family office executives. The initiative includes a council of 50 family office leaders and Booth alumni who help manage the program.
Paul Carbone, co-founder and vice chairman of Pritzker Private Capital, said: “Given the family office market, the amount of capital overseen, and the importance of family offices in commercial, investment, and philanthropic activities, “It’s remarkable,” he said. He is also a member of the Family Office Initiative Steering Committee. “The challenges they face will only increase, and here at Booth we have a deep intellectual capital base that can be applied to these questions.”
The Booth Initiative is part of a growing number of family office programs at top universities. Business schools such as Harvard University, Columbia University, Northwestern University, and Pepperdine University have begun offering courses aimed at family offices and family-owned businesses.
But the Booth program is the university’s biggest bet on family offices in two decades. In 2004, the Wharton School at the University of Pennsylvania and the CCC Alliance, a peer group of family offices, partnered to form the Wharton Global Family Alliance. Through research, roundtables, courses, special presentations, workshops and more, the Wharton Global Family Alliance is a leading resource for family offices and the broader wealth management industry.
Get Inside Wealth straight to your inbox
For top universities, family offices offer a rich potential source of research funding and business school students, along with expertise in one of the fastest growing areas in finance. For family offices, this program will help train the next generation of family office leaders at a time when talent is in short supply and family offices are competing for experienced investors, accountants, lawyers and real estate planners.
The number of family offices has increased from about 6,000 in 2019 to more than 8,000, according to Deloitte. Their assets are expected to grow from $3.1 trillion today to more than $5.4 trillion by 2030. As more wealthy graduates start or work in family offices, they are becoming an important conduit for donors and fundraising. Trust companies, private banks and consulting firms eager to serve family office clients may also sponsor the program.
“This is a great opportunity for the Booth School, our students and the community,” said John C. Heaton, a professor of finance at the Booth School who will begin teaching a new MBA course called “Family Office” next year.
Research is at the core of Booth and Wharton’s programs. Private banks and asset management companies are already publishing a growing number of studies and analyzes of family offices. But universities insist the research will be more rigorous and objective.
For example, Booth said he works with software companies that provide back-office platforms for family offices to obtain anonymized, aggregated data on portfolio and investment changes.
“This is real data, not a filtered opinion of what people are doing,” Heaton said.
The initiative will decide what to investigate based on proposals from the Family Office Council. For example, when Booth asked family offices about their research priorities, the top answer was behavioral economics. Because Booth is known for its behavioral economics program, it would be helpful to have family office professionals help families navigate interpersonal relationships and the decision-making process, Carbone said.
“It was surprising to us that the biggest issue wasn’t investment or risk management,” Carbone said. “It was about human dynamics.”
Wharton’s research is also based on questions from family offices. In addition to our regular research papers, we annually produce a 100-page “benchmark study” covering a wide range of topics that is only available to participating family offices.
Raphael “Rafi” Amit, a Wharton School business professor who founded and leads the Wharton Global Family Alliance, said one of the issues he focused on in this year’s benchmarking study was the rise in direct transactions. For example, more family offices are bypassing private equity funds and investing directly in private companies, but few have the necessary expertise.
“Most of these families don’t employ private equity professionals,” he says. “They are experts who know how to evaluate deals, how to structure deals, how to manage exits, how to add value. The jury is still out on whether this strategy actually works.”
Universities can also provide an increasingly rare experience for family office professionals: nonprofit gatherings. As family office conferences have become dominated by sponsors, salespeople, and vendors, family offices have turned to universities to host more “pure” peer gatherings.
Wharton’s annual Family Office Roundtable Forum, a collaboration between Wharton and leading families, has become one of the most coveted events of the year for family offices, with annual invitees limited to 60 or 70 people. It has been. Last year’s roundtable was held in Tokyo, while the 2022 meeting will be held in Zurich.
“There are many family offices that wanted to participate, but we had to limit it to 76 families,” Amit said. “We want to keep this event private and small to allow people to share ideas and perspectives. This is purely for fun. There is no commercial purpose.”
Booth is planning its own Family Office Summit for next May. Approximately 200 participants from family and multifamily offices are invited, including members of the Family Office Council.
“Families can attend weekly family office meetings if they wish,” Carbone said. “But we’re building a secure network. There’s no commercial angle, no one selling products or services.”
