KPMG’s 2024 Australian Family Office Compensation Benchmark Report questioned 100 family office executives, defined as a corporate structure set up to manage the assets of a single family or multiple families.
It is estimated these families account for 40 per cent of active private capital investors into private equity and credit over the last 12 months.
The majority of family offices, 61 per cent, reported targeted annual real returns on investment of between 7–11 per cent. A small 12 per cent reported targeting returns in excess of 15 per cent which KPMG noted would require “high levels of risk or leverage or both”.
Investment policy statements would typically set out return objectives over a defined period based on time frame, investment objectives and risk tolerance with the target described as a function of CPI + a percentage range.
“The clustering of responses in the 7–11 per cent range is therefore to be expected and may even represent a closer clustering, if the ROI target were expressed instead as ‘CPI + per cent’ recognising the translation of the long-term ROI into current ‘inflation adjusted’ terms dependent upon the local economic conditions.”
Less than half (49 per cent) reported having a benchmark in place, although this was up from 42 per cent in the 2023 study.
While investment team sizes varied, typically only two individuals were involved in the investment management process although 18 per cent had five or more team members which KPMG posited would be at firms which had over $1 billion in assets under management.
“The relationship can only be inferred, of course, but it may also be indicative of a much more significant trend towards the role of technology in managing and administering portfolios and the impact this has had on staffing.”
An earlier report into technology found nearly half of the respondents reported undertaking the functions of portfolio construction, investment management and portfolio administration internally, with over 80 per cent choosing to do so either solely or with external third parties.
Looking at their concerns, cyber security was flagged as the top concern, being cited by 84 per cent of respondents followed by managing the impact of taxation and domestic economic conditions.
“Changes in government, budgetary pressures and the sense of a need to address wealth inequality through policy changes all have ramifications for wealth owners.
“A sentiment that cascaded, presumably, into the period of the undertaking of the study itself, in the wake of the US’ stated tariff proposals.”
