Although they can cater to a wide range of services – pensions, tax, philanthropy, lifestyle services – family offices across the globe are focusing on one theme: investment management. Here, they face an increasingly complex environment: diverse asset classes, more information to manage, and the need for transparency and risk reduction, while aiming for better risk and performance management. Against this backdrop, it is key for them to reflect on how they must secure wealth for future generations. A multifaceted goal which can be met by using smart modular technology.

Family offices are shifting capital allocation in the face of inflation, geopolitical unrest, fluctuating policy rates and investor preferences, e.g. towards sustainable investment projects. Against this backdrop, the number of asset classes in which family offices invest is on the rise.

Investments are not only restricted to financial markets but can also include alternatives. Art, private equity and venture capital are gaining a bigger share of allocations. As for the latter two asset classes, family offices are becoming more prominent in deal-making alongside M&A, real estate transactions, and directly investing in businesses. And increasingly more, family office professionals are actively investing in crypto investments.

Family vehicles are also transitioning to a more active fund management approach as a function of portfolio diversification. This general shift in diversification, especially since family offices invest across several investment entities, means increased reporting, accounting and compliance complexity for teams that remain lean.

Lean but growing

Most family offices are lean, employing a team of ten or fewer people, just enough to fill  investment management needs. Additionally, only 26 per cent have succession plans. Many firms also lack governance frameworks, cybersecurity controls, and risk management processes outside of investments. However, as family offices mature beyond the first generation, their assets under management reaching USD1 billion, and they grow in employee size, they are more likely to put more robust protocols in place.

Looking ahead, families are feeling the winds of change ushered in by wider digitalisation and they are changing their approaches to technology.  In some offices, younger generations are coming to the helm and spurring innovation. They are seizing on the opportunity technology to be able to achieve their investment and operational goals, all of which are essential to supporting future generations.

The digital-first family office

Technology, while not the answer to each family office challenge, does play a key role in nearly all of them via its smart application. Tech makes wealth management processes more efficient and cost effective and simplifies complexity across the broad range of allocations family offices have.

For example, family offices are increasingly adopting cloud-based digital platforms to manage portfolios, run analytics, and handle regulatory reporting across the globe. These platforms offer firms a single system that can minimise errors and inefficiencies involving the key value that sits at the heart of systems: data.

Accurate, timely, and consistent data is indispensable to workflow optimisation of all investing-related functionalities for family offices. Such data can be easily accessed via Data-as-a-Service providers that carry data on millions of instruments, across all asset classes and scores of exchanges. Amidst the abundance of available data, only a customised dashboard service that is designed to provide easy access to curated global data and exchanges will unlock the full potential of information needed for sound decision making.

Customised and intuitive dashboard

The need for robust data tools and solutions that allow financial institutions to manage investment decisions, reduce costs and comply with changing market requirements are more critical than ever. By streaming exactly the data a family office professional needs, its intuitive dashboard provides a highly responsive solution that delivers actionable insights, up to the minute pricing and full company reference data, fully tailored to the user’s needs.

In terms of creating continuity between generations, technology also plays a role. AI-powered solutions are available which enable intergenerational conversations via video. Here, a current steward would record multiple videos about the management of the office, family history, investments, or anything else they deem relevant. When they pass, those taking over the helm could directly see their family member before them, asking questions as if they were still in the room. An AI system would choose the appropriate clippings in response to questions.

Such a digital-first approach gives families an edge in their investment management focus and beyond. A development particularly important as family offices begin bringing additional operations under the family office umbrella or merge with other family offices to further optimise resilience, governance and operations.

Supporting future generations

Family offices by nature are generational undertakings, their horizons being 50 to100 years. And since technology will increasingly become the core of their service provision, the question arises of how they can choose vendors that support sustainable investment over lifetimes. Especially since the abundance of software solutions available that can help family offices increase efficiency in managing their wealth can be overwhelming.

When considering outsourcing solutions, family offices should also play the long game. This practically translates to prioritizing vendors that constantly develop products to ensure they are up to date.Vendors should also have outstanding support services and maintain a security-first approach. The latter point is key considering the impact of the European Union’s Digital Operational Resilience Act (DORA) and rising cybersecurity threats.

Finally, addressing the challenges faced by family offices today requires leveraging modular, intuitive technology. These systems provide plug-and-play components that allow users to create workflows for processes, data management, trading, and funds with ease.

They enable the consolidation of diverse asset classes, automate reporting, integrate ESG data, and simplify regulatory compliance. Importantly, such technology can often operate alongside existing legacy systems, offering a seamless transition to more efficient and adaptable operations. Embracing these innovations presents a significant opportunity for family offices to evolve and thrive in a rapidly changing landscape

Iress writes that Dow Jones has one of the world’s largest news-gathering operations globally, providing news and business information across multiple formats. Dow Jones Newswires offers global coverage complimented by local reporting expertise in key markets including Australia. Through the partnership, all of Iress’ global market data and trading customers will be able to access premium news from Dow Jones Newswires, including select content from The Wall Street Journal, Barrons, MarketWatch and Investor’s Business Daily.

Iress’s CEO, Global Trading and Market Data, Jason Hoang says: “It’s of critical importance that traders have access to trusted, accurate and timely information. Through this partnership, we believe that our clients can be confident that the information they use through Iress’s software is of the highest calibre and can be relied upon to help make better trading decisions.”

Dow Jones Newswires’ General Manager, Joe Cappitelli, says: “Wealth and investing professionals around the world trust and rely on our premium news, insights and analysis to identify investment opportunities and better serve their clients. By integrating our real-time market news directly into customer workflows, Iress is creating even more value for their clients, enhancing their user experience and helping them make smarter investment decisions.”  

Apex Group writes that it is a leading global provider of financial services with over 13,000 employees globally, adding that this is a significant step in GAM’s strategy to streamline its operations and focus on its core investment management capabilities for clients. This transaction is subject to applicable regulatory approvals and other customary conditions.

Since 1983, GAM writes that it has provided clients with access to great investment talent, from High Conviction Equities to Specialist Fixed Income, Multi-Asset Solutions and Alternatives, often supported heavily by its own innovative Fund Management Services. Today, these services are highly commoditised and more cost-effective when outsourced, allowing GAM to focus on what it does best; benchmark beating, active Investment and Wealth Management.

The agreement to transfer includes the sale of GAM Fund Management Ltd, Dublin (GFML), including its in-house transfer agency function to Apex Group. The agreement reached also means that GAM and Apex Group will transfer management company services for GAM funds in Luxembourg and the UK to corresponding subsidiaries of Apex Group.

Apex Group offers a global single-source solution providing all services required across the full value chain of the business via one convenient and efficient relationship.

The partnership with Apex Group will also bring the following key benefits to GAM and its clients, the firms say:

Improved client service: Clients will benefit from streamlined services and enhanced support as GAM integrates with Apex Group’s robust platform, services and capabilities.

Focus on core competencies: Allows GAM to concentrate more on its core investment management capabilities, ensuring that resources are directed towards the pursuit of superior investment performance for clients.

Enhanced efficiency: The transfer of management company services enables GAM to consolidate its operations, reduce complexity and increase operational efficiency.

Scalability: By leveraging Apex Group’s first-class expertise, services and infrastructure, GAM will be better positioned to scale its operations and respond to market demands.

Elmar Zumbuehl, CEO of GAM, says: “This agreement with Apex Group is a testament to our commitment to focus relentlessly on behalf of our clients to do what we do best – providing access to great investment talent, distinctive investment solutions, first-class service, and global distribution. We are confident that this partnership will enhance our capabilities supported by a robust, efficient and highly scalable operational framework. We look forward to a successful collaboration with Apex Group and the benefits it will bring to our clients and future capabilities.”

Peter Hughes, Founder and CEO of Apex Group, says: “Apex Group is a leading global financial services provider offering a full suite of services to the industry and we welcome GAM into the Group. We are extremely pleased to support their strategic objectives. Our expertise in management company services will provide GAM with the operational efficiency and scalability needed to thrive in today’s competitive market. We are excited to embark on this journey together and deliver exceptional value to GAM’s clients.”

The completion of the sale of GFML and the transfer of management company services in Luxembourg and the UK is expected by the end of Q4 2024.

Tradeweb CEO Billy Hult says: “Tradeweb in Q2 reported double digit, YoY volume growth in rates, credit, money markets and equities. We set new records for quarterly ADV in U.S. government bonds, fully electronic U.S. high yield and repo, as well as capturing record share of fully electronic U.S. high grade credit. The second quarter of 2024 culminated with a strong June, led by a 54 per cent YoY increase in rates ADV and continued momentum in credit ADV – up 67 per cent YoY. In addition to volatility across many of our markets, Tradeweb volumes in June and throughout Q2 reflected increased adoption in a range of trading protocols and strong client engagement.”

In June 2024, Tradeweb reports that its records included:

·         ADV in U.S. government bonds

For the second quarter of 2024, Tradeweb records included:

·         ADV in U.S. government bonds

·         ADV in fully electronic U.S. high yield

·         ADV in repurchase agreements (Repo)

·         Share of fully electronic U.S. high grade TRACE

Rates  

·         U.S. government bond ADV was up 50.8 per cent YoY to USD210.7 billion (bn). European government bond ADV was up 17.4 per cent YoY to USD50.5 bn.

·         U.S. government bond volumes were supported by growth across all client sectors. Increased adoption across a range of protocols and favorable market conditions contributed to the increase in volume. The addition of r8fin continues to contribute positively to wholesale volumes. Market volatility and sustained primary issuance across Europe and the UK helped drive trading volume in European government bonds, especially gilts.

·         Mortgage ADV was up 22.9 per cent YoY to USD208.9bn.

·         

·         Stronger To-Be-Announced (TBA) volumes were a result of increased activity from the hedge fund community, in addition to heightened basis trading. Client participation on our securitized products platform set a new record and volume executed by mortgage originators also hit a new high.

·         Swaps/swaptions ≥ 1-year ADV was up 56.0 per cent YoY to USD437.3bn and total rates derivatives ADV was up 69.1 per cent YoY to USD782.2bn.

·         Strong volume in swaps/swaptions ≥ 1-year was driven by global political uncertainty and pending central bank policy decisions, as well as a 41 per cent increase in compression activity, which carries a lower fee per million. Client trading activity continued to increase in the request-for-market (RFM) protocol while inflation and emerging markets swap growth remained strong. 2Q24 compression activity was lower than 1Q24.

Credit  

·         Fully electronic U.S. credit ADV was up 41.4 per cent YoY to USD7.0bn and European credit ADV was up 24.2 per cent YoY to USD2.5bn.

·         U.S. credit volumes were driven by increased client adoption, most notably in request-for-quote (RFQ), portfolio trading and Tradeweb AllTrade. Tradeweb captured 18.9 per cent share of fully electronic U.S. high grade TRACE, and 8.1 per cent share of fully electronic U.S. high yield TRACE. “In Europe, portfolio trading and our unique dealer selection tool (SNAP IOI) saw increased client adoption.”

·         Municipal bonds ADV was up 30.4 per cent YoY to USD410 million (mm).

·         Volume growth outpaced the broader market, as institutional and retail volumes both surpassed 20 per cent growth YoY amidst robust issuance.

·         Credit derivatives ADV was up 92.0 per cent YoY to USD14.7bn.

·         Increased hedge fund and systematic account activity, along with heightened credit volatility, led to increased swap execution facility (SEF) and multilateral trading facility (MTF) credit default swaps activity.

Equities  

·         U.S. ETF ADV was down 11.1 per cent YoY to USD8.1bn and European ETF ADV was up 18.1 per cent YoY to USD2.8bn.

·         ETF market volumes remained muted as market volatility remained low. On Tradeweb, U.S. ETF institutional volumes remained strong, while wholesale market volumes were lower. “European ETF volumes grew as clients continued to embrace our automated rules-based trading protocol.”

Money Markets  

·         Repo ADV was up 20.8 per cent YoY to USD599.2bn.

·         Increased client activity on Tradeweb’s electronic repo trading platform drove strong global repo activity. The combination of quantitative tightening, increased collateral supply, and current rates market activity shifted more assets from the Federal Reserve’s reverse repo facility to money markets. Retail money markets activity was strong as markets priced in less aggressive Fed rate cuts.

RATES   

US government bond ADV was up 70.7 per cent YoY to USD205.3 billion (bn). European government bond ADV was up 23.9 per cent YoY to USD45.6bn.

US government bond volumes were supported by growth across all client sectors. Increased adoption across a wide range of protocols and favourable market conditions contributed to the increase in volume. The addition of r8fin continues to contribute positively to wholesale volumes, Tradeweb writes. Robust primary issuance across Europe and the UK helped drive trading volume in European government bonds.

Mortgage ADV was up 34.8 per cent YoY to USD206.1bn.

The continuation of elevated roll activity, together with a spike in volatility, contributed to higher ADV on our To-Be-Announced (TBA) platform, while increased client adoption contributed to strong volumes in specified pool trading.

Swaps/swaptions ≥ 1-year ADV was up 118.9 per cent YoY to USD475.7bn and total rates derivatives ADV was up 127.8 per cent YoY to USD796.0bn.

Strong volume in swaps/swaptions ≥ 1-year was driven by ongoing institutional client activity in response to current global central bank policy decisions, as well as a 137 per cent increase in compression activity which carries a lower FPM. Quarter to date compression activity is trending lower than 1Q24. Clients continued to utilise the request-for-market (RFM) protocol for larger risk transfers, while inflation and emerging markets swap growth remained strong.

CREDIT   

Fully electronic U.S. credit ADV was up 96.1 per cent YoY to USD8.0bn and European credit ADV was up 19.4 per cent YoY to USD2.3bn.

Higher U.S. credit volumes were driven by increased client adoption, most notably in request-for-quote (RFQ), portfolio trading and Tradeweb AllTrade. Tradeweb captured a record 19.7 per cent share of fully electronic U.S. High Grade TRACE, and 7.3 per cent share of fully electronic U.S. High Yield TRACE. Increases in European credit volumes were driven by continued client adoption of portfolio trading, unique dealer selection tools (SNAP IOI) and session-based trading.

Municipal bonds ADV was up 20.8 per cent YoY to USD347 million (mm).

Volumes outpaced the broader market, which was up roughly 6 per cent YoY[2]. Institutional and retail activity was strong, with robust buyside activity amidst active issuance.

Credit derivatives ADV was up 65.0 per cent YoY to USD15.3bn. 

Increased credit volatility and credit default swap indices (CDX) roll trading led to increased swap execution facility (SEF) and multilateral trading facility (MTF) credit default swaps activity.

EQUITIES   

US ETF ADV was up 24.8 per cent YoY to USD7.8bn and European ETF ADV was up 19.4 per cent YoY to USD2.8bn.

US and European institutional ETF volumes continued to grow as more clients embraced Tradeweb’s electronic RFQ protocol. U.S. wholesale ETF volumes also increased as the customer base continued to expand.

MONEY MARKETS   

Repurchase agreement ADV was up 39.4 per cent YoY to USD598.2bn.

Increased client activity on Tradeweb’s electronic repo trading platform drove record global repo activity. The combination of quantitative tightening, increased collateral supply, and current rates market activity shifted more assets from the Federal Reserve’s reverse repo facility to money markets. Retail money markets activity was strong as markets priced in less aggressive Fed rate cuts.

The firm writes that, powered by BBH’s data integration and connectivity engine Infomediary, the service involves the curation of fund holdings data, which can be leveraged as part of multiple fund output publications, including regulated fund disclosures.

The curated data, which involves ingesting, transforming, and aggregating disparate data and optimising it for distribution, has resulted in greater efficiencies, enhanced risk mitigation and transparency, and improved consistency across AB’s outputs, the firm says.

“Having easy access to high-quality fund holdings data that can be leveraged in our fund reporting is critical for us to evolve our business,” says Joe Mantineo, Head of Fund Administration at AB. “With BBH as our partner in this regard, we have consistent and reliable data to support these activities – data that is available on-demand and is customizable.”

BBH’s data management services can be configured to aggregate data across all administrators and third parties, enabling a provider-agnostic model that gives flexibility and interoperability to the asset manager. The authoritative data set has provided a doorway into other strategic areas in need of data transformation and oversight solutions and will lead to addressing additional use cases.

“Simply put, an asset manager’s ability to focus on the front office is limited by inconsistency and the burden of manual reviews and processes,” says Josh Fine, Co-Head of Infomediary Data Solutions at BBH. “Our work with AB demonstrates the value of addressing those issues with authoritative data sets. What started as a specific use case with fund disclosure documents, is now scaling to other use cases across fund operations.”

The firm writes that building on its partnership with Broadridge Financial Solutions Inc. (NYSE: BR), eToro users, including those holding fractional shares, will now be able to participate in AGMs for stocks listed all over the world by casting a proxy vote on issues such as mergers, executive pay and environmental, social and governance targets.

eToro previously launched proxy voting for US stocks only, and in 2023, more than 145,000 votes were submitted by eToro users. The stocks which received the most votes by eToro users in 2023 include Apple, Amazon, AMC and GameStop.

According to eToro’s Retail Investor Beat, a global survey of 10,000 retail investors across 13 countries, appetite for voting is increasing. Almost one in three (29 per cent) retail investors have voted in an AGM before, up from 26 per cent from the survey published in June. Amongst those who have voted, the most common topic to have voted on is the election or re-election of directors (47 per cent), followed by dividends (45 per cent), share buybacks (34 per cent) and exec pay (30 per cent).

Dan Moczulski, UK Managing Director, eToro, says: “eToro users embraced proxy voting last year and we are thrilled to be building out this feature to include all stocks on our platform. Our users invest in companies from all over the world. Now they can have their voice heard with these companies by having a say in big corporate decisions.

“Whilst institutional shareholders have long been able to influence boards, executives and the direction of businesses, retail investors have not always been given the voice that they deserve. However, with the explosion in retailing investing that we’ve seen in recent years, this is changing. Proxy voting is a critical part of this process, enabling this group of investors to have a real impact in their role as shareholders. The appetite for voting is only increasing amongst retail investors and I am excited to see where this goes in the next few years.”

Demi Derem, General Manager of International Corporate Governance, Digital Transformation and Market Innovation at Broadridge, said: “We are delighted that the voting on US-only stocks has proved so popular with eToro’s users since the launch of their service last year and we are proud to further develop our partnership to support an expanded capability that includes all stocks, globally.

“We are witnessing the evolution of a new generation of retail investors – one that has expectations for more choice, convenience, and simplicity as their appetite to influence a company’s direction grows. At Broadridge, we remain firmly committed to championing shareholder democracy and increased investor engagement, and our collaborative effort to support eToro’s expanded services is a compelling example of this.”

Gili Wolff, Senior Director of Product, Trading & Dealing at eToro, added: “As we continue to build out eToro’s stock offering, proxy voting will be an increasingly important feature for our users, allowing them to exert their rights as shareholders and have a direct influence on the companies they hold in their portfolio.  We are very excited to be rolling this out across our whole stock universe and look forward to seeing eToro clients engage with it.”

The firm writes that C8 Hedge offers corporate treasurers and investment professionals precise guidance for actively and optimally managing their foreign exchange exposures across multiple currencies, using intuitive and simple to use online tools.

Employing machine learning and statistical models to help predict future FX movements, the platform helps users quickly craft customized hedging solutions that align precisely with their needs.

Through its active approach, the platform allows users to potentially benefit from currency movements, boosting returns beyond those offered by passive FX hedging. It can also adapt to changing market conditions to quickly seize opportunities and mitigate risk, offering a dynamic hedging solution to shield portfolios against adverse currency movements.

In addition, C8 Hedge users can:

Calculate optimal FX hedge ratios for all their currency exposures, both assets and liabilities

Add risk weights for each currency exposure

Calculate optimal FX ratios for each currency within a portfolio risk limit

Use their existing FX execution implementation – no need for any integration work

Keep full control of all FX hedging

The C8 Hedge platform is managed by Jonathan Webb, formerly Head of FX Strategy at Jefferies, and previously a portfolio manager/ proprietary trader at major banks (including HSBC, Credit Suisse, RBS, Bank of America) and hedge funds (C-View, GLC).

“Managing FX exposure can be complex and easy to get wrong, a combination that provides treasurers and funds with an unwelcome problem every time they buy and sell overseas assets,” says Webb. “C8 Hedge makes the process much simpler and effective by automating the risk management process, offering users proactive strategies to optimise outcomes while freeing them to concentrate on their fundamental business activities”.

“Applying our systematic trading models to FX hedging through an intuitive platform that anyone can use allows corporates and funds avoid the complexities they would otherwise face when they buy an asset or sell products overseas” says Mattias Eriksson, CEO at C8.

“FX presents intricate risks that require a tailored approach, which is why we have designed the platform to allow users to easily craft customized FX hedging solutions that meet their exact requirements every time they need to handle foreign currency exposure”.

The study surveyed a total of 2,750 clients from the UK (500), Australia (350), Singapore (85), Germany (150) and Japan (1600). It was aimed at understanding clients’ sentiment and their confidence levels and concerns, by studying their financial goals, ambitions, financial markets, portfolio performance, and future trading intentions.

Key UK highlights from IG Group Client Sentiment Study:

Geopolitical conflicts and wars (58 per cent) now rank as the primary concern amongst respondents, followed by recession (46 per cent), and inflation (45 per cent).

A majority (67 per cent) of IG UK retail traders and investors are worried about the cost-of-living crisis. Despite that, only 6 per cent of clients said they plan to cut back on trading and 7 per cent plan to cut back on investing.

While UK clients remained concerned about the state of their economy the level of concern has reduced compared to June last year.

IG clients are striving for financial freedom across all markets, although the focus for IG traders in the UK is “saving up for retirement” (56 per cent).

In terms of sectoral outlook, 28 per cent of UK clients believe that “Energy” (28 per cent) will experience the largest growth in the next six months, followed by “Technology Hardware and Equipment” (24 per cent) and “Software and services” (23 per cent).

Billy Hult, CEO of Tradeweb, says: “Tradeweb performed exceptionally well operationally and financially in 2023, a year with no shortage of macro challenges. We invested in growing our international footprint across new geographies and expanded our product offerings through two strategic acquisitions, r8fin and Yieldbroker. Keeping with this growth mindset, we announced a series of new or expanded partnerships with FTSE Russell, LSEG Data & Analytics and BlackRock. 

“Capitalising on organic opportunities, we grew market share across our global businesses and helped clients stay in front of important trends such as multi-asset class and algorithmic trading. In credit, we reached a record 17.2 per cent share of fully electronic US High Grade TRACE in the fourth quarter. Our successes over the past year have led to our 24th consecutive year of revenue growth and profitability, positioning us well for future opportunities. I am proud of what we accomplished in 2023 and pleased with our strong start to 2024.”