Revealed: family offices are a promising new player in the art market

The assets of the top family office in the world are immense. The office that runs the Walton family’s holdings (we’re talking about Walmart, natch…) is worth an eye-watering $244.5bn, according to the research platform SWFI. Other family offices—such as those running the fortunes of Jeff Bezos or Bill Gates and his former wife Melinda are also stratospheric, some worth over $100bn.

In case you don’t know, family offices are private wealth management firms which look after the fortunes of one or more UHNWI (Ultra High Net Worth Individuals), offering from something as basic as paying the bills to advising on philanthropy, investments and estate planning. They differ from wealth advisors in that they offer a much broader service—which might include looking after art collections, both existing and being built up. They can be for a single family (as in the examples above) or work for multiple families. And you have to be seriously rich to envisage establishing one—with $100m-of-investible-assets rich, in fact. Family offices are not new: it is believed that collector John D. Rockefeller established the first in the US in 1882; today there may be over 7,000 in that country alone.

The latest Deloitte art and finance report puts family offices centre stage and some interesting data emerges. The authors found that they allocate over 13% of clients’ fortunes to art and collectibles—almost five percentage points higher than private banks. In Deloitte’s first art and finance report in 2011, family offices didn’t even figure—in the current one, they sampled 32.

One of the contributors is Maria de Peverelli, the executive chairman of art management at Stonehage Fleming Financial Services. She says: “Many family offices outsource their collection management, which is where Stonehage Fleming stands out; to my knowledge we are the only multi-family office which manages existing collections and those being created as we speak, along with ones that have been in the family for 500 years!”

I ask her why there is such a heightened awareness of the role of art in family offices today. “Quite simply, it’s the value!”, she responds immediately. “Collectors are realising that a good part of their assets are actually held in art and it needs looking after just like other assets.”

In addition, she says, thanks to the press and social media, people are much more aware of the prices art can fetch, and she is seeing an increasing demand for investment and diversification into this sector.

“Our job is becoming more and more relevant,” she continues. “In addition to the increase in value of art, there are many risks, and these are very different from 20 years ago when nobody was talking about provenance, for example.”

What does this mean for the art market? As De Peverelli says, greater public awareness is making owners—and potential owners—of art far more interested in collecting art. The benefit will be not only for art market players but also for those who advise them, since, as she points out: “A lot of people think the market is easy to navigate, but it isn’t, as we well know!”