Family offices have been a cornerstone of Latin America’s wealth management practices for more than a century. Initially these personal asset managers were created to look after the wealth of ultra-high net-worth families, many of whom own or sold off large companies. Now they have become key innovative players in the wealth food chain.
Traditionally, many seek out local opportunities in real estate, with a member of the family designated as the lead money manager. But a new generation of more sophisticated kin dismiss the commodified offerings traditionally pushed by big banks and are seeking more tailored investment solutions. Many are hiring seasoned financial professionals to invest directly in venture capital and private equity, and to co-invest in projects with other wealthy families.
In Mexico, for example, Modelo beer heiress María Asunción Aramburuzabala has invested in consumer brands like Tory Burch, technology and even a German automaker through Tresalia Capital, the financial group where she acts as CEO. Forbes magazine calculates Aramburuzabala’s fortune at $5.6 billion, making her the sixth-richest person in Mexico.
West Lockhart, head of wealth for Latin America at BlackRock, describes family offices as “key influencers” and “transformational partners” in the wealth industry. “Their long-term investment horizon and the appetite for a variety of solutions puts them at the forefront of investor sophistication in the wealth ecosystem,” he says.
EY estimates more than 10,000 single family offices operate globally, at least half of which were set up in the last 15 years. Increasingly concentrated wealth held by very rich families is fueling this growth, EY says. And the plethora of large family businesses in emerging markets makes the family office concept a natural fit for Latin America.
The evolution of family offices reflects the changing goals and ambitions of their clients. “As assets grow, the complexity of managing those assets grows,” says Renato Grandmont, co-founder, managing partner and chief investment officer at Link Capital Advisors, a multi-family office that caters to global and Latin American families with $5 million to $1 billion-plus in assets.
“The question is: Who do you want working with you to deal with those issues?” asks Grandmont, who spent more than a decade as chief investment officer for Latin America at Citi Private Bank and then UBS Wealth Management prior to starting Link in 2018.
What’s more, younger offspring are often more global than their ancestors. They study abroad and may marry people from other parts of the world. They may no longer reside in the country where their family’s wealth originated, and they might hold multiple passports. Members of the new generation are more investors than industrialists.
And they are often more concerned about the environmental and social impacts of their investments. “Family offices and high net worth individuals are the ones generating the strongest demand for sustainable forms of investments,” says BlackRock’s Lockhart.
While some family offices merely handle investments, others take on broader advisory roles such as managing succession planning and tax matters—even performing household chores like paying bills or purchasing big ticket items like airplanes. Some may intervene in intra-family quarrels, acting as trusted consultants and neutral parties, or lobby for a problematic or inept family member to take a more passive role in a family business. Advisors with more corporate experience will get involved in the family businesses, sitting on boards and making introductions for possible mergers and acquisitions. Most charge a fee equal to a percentage of assets under management.
With time, substantial family offices can morph into sizable financial groups. In Argentina, Quilvest began as a family office to oversee wealth of the Quilmes beer fortune. Today, it’s a full-fledged global investment manager with a team of nearly 400 professionals with 13 offices in 10 countries.
In Peru, the Romero family has set up an investment office akin to a hedge fund or private equity firm that seeks to create value through purchasing and selling companies. The bulk of the proceeds are reinvested in the family’s own food, industrial and other companies, after a 10% dividend is paid out to family members.
Founded by Calixto Romero Hernández in 1888, Grupo Romero originally exported straw hats. Today, the group consists of nearly a dozen companies, including consumer goods titan Alicorp, which sells processed foods like mayonnaise and laundry detergent in 23 countries, logistics firm Ransa, and Primax gasoline service stations. Annual sales top $3 billion, making it one of Peru’s biggest businesses.
A business group with such a long history contains multiple family lines. Some share a surname but behave like distant relations. Family members decide how to spend the dividends each receive—be it on a yacht or a business purchase—through a private banker or family office.
“I don’t know what they do with the dividends,” says Marco Peschiera, a Carlyle veteran who is CEO of the Grupo Romero Investment Office. He describes the office as a “private investment holding company,” with a style that’s more institutional than personal.
Peschiera works directly with the heads of each Romero company to develop investment strategies, such as five-year plans, and sits on the company boards. “When you go from having one company to 10 companies over several generations, an entity becomes an economic group,” he says. “It’s like managing a conglomerate.”