In recent years, the popularity of family offices among China's high-net-worth individuals has continued to rise.

As early as 2022, according to the "2022 China Family Office Industry Development Trends White Paper" jointly released by Swiss Association of Switzerland and Hurun Research Institute, the number of institutions named "Family Office" in China has reached nearly 10,000, more than doubling year-on-year, mainly concentrated in cities such as Shanghai, Shenzhen, Beijing, and Hangzhou.

At the same time, the Monetary Authority of Singapore (MAS) and a number of authoritative institutions (such as Bloomberg, South China Morning Post, UBS, Temasek Family Office Association, etc.) disclosed that by the end of 2023, the number of single family offices (SFOs) registered in Singapore has exceeded 1,100, more than three times the number in 2020. Among them, more than 40% of the founders are high-net-worth families from mainland China and Hong Kong.

The rapid expansion in the number of family offices has also brought about structural changes in asset allocation preferences.

The Asian Private Wealth in Digital Assets Report 2024 pointed out that during 2024, the digital asset allocation of many high-net-worth individuals and family offices has increased from less than 5% to more than 10%, and plans to increase further in the next 12 months. The 2024 Global Family Office Survey Insights report released by Citi Private Bank also showed that about a quarter of the family offices surveyed have invested or plan to invest in digital assets, and the Asia-Pacific region is particularly leading in this field, with 37% of respondents already involved or expressing clear interest.

Portal Labs has also mentioned in past articles that for high-net-worth Chinese investors, family offices may be the key vehicle for investing in Web3. However, to understand why family offices are a natural fit with Web3, we need to go back to the starting point: What problems do family offices solve?

What is a “family office”?

In the world of high net worth individuals, family offices (hereinafter referred to as FOOs) are regarded as the "ultimate form of asset management."

It is not a financial product, nor is it an institutional service, but a complete set of exclusive management systems built around family wealth, or simply understood as an organizational structure that serves the family itself.

According to the different management methods and service providers, family offices are divided into the following typical types in practice:

1. Single Family Office (SFO)

The most common type of family office is established by a single high-net-worth family and serves entirely the members of that family.

SFO usually has a full-time team responsible for asset allocation, tax planning, legal affairs, inheritance arrangements, charity management and other multi-dimensional affairs. Its advantage is "complete autonomy and full control", but the establishment and operation costs are high, which is suitable for ultra-high net worth families.

2. Multi-Family Office (MFO)

It is established by professional institutions to serve multiple families, and usually builds teams based on financial institutions, law firms, and trust companies.

The advantages of MFO are "resource sharing and professional services", which can cover core needs such as investment consulting, family governance, and legal structure, while reducing manpower and operating costs, making it suitable for middle- and high-net-worth families.

3. Virtual Family Office (VFO)

It is not an independent organization, but a combination of outsourced professional services, such as hiring an external cooperation network consisting of family trust consultants, tax accountants, FAs, etc. to form a "lightweight" operating structure.

The advantages of VFO are “flexibility and pay-as-you-go”, which is suitable for families in the initial stage of home-based business.

4. Overseas family offices (such as Singapore SFO)

A cross-border structural path that has emerged in recent years is common among high-net-worth individuals in mainland China who set up SFOs in Hong Kong, Singapore and other places to meet their needs in global asset allocation, tax structure optimization, identity planning and other aspects.

This type of family office usually combines domestic family members, offshore company structures and overseas financial service resources to form a customized solution that combines regulatory compliance with a global perspective.

However, even though the types are different, the primary goal of the family office is not to pursue short-term gains, but to build a dedicated management system that can survive the cycle and adapt to intergenerational inheritance. Therefore, in terms of functional design, the family office is usually built around the following core modules:

• Tax and legal structure design. Optimize tax costs and avoid compliance risks through cross-border entities, trusts, and fund structures;
• Asset allocation and investment and financing management. Set long-term investment strategies and coordinate multiple types of assets such as real estate, equity, funds, and digital assets;
• Family governance and inheritance mechanism. Formulate equity, dividend, inheritance and education plans to realize the continuation of family will;
• Daily administrative and affairs support. Covering "full-service" services such as legal advisors, secretarial teams, accounting services and even health management.

However, as Web3 and crypto assets gradually enter the mainstream vision, family offices are also being pushed into a new asset structure reform. Crypto assets with high volatility and high technical barriers seem to contradict the concept of "stable inheritance". But it is this system that emphasizes governance structure, resource allocation and long-term perspective that gives family offices a natural advantage in places that seem to be the least suitable.

Why is it a “family office”?

The reason why family offices are a natural fit for Web3, especially the investment path of assets such as RWA, is that it is a governance system born for "complexity".

First, the underlying structure of RWA projects often spans regions, laws, and currencies.

Whether it is through tax bonds issued in the United States or tokenized real estate under the Singapore structure, this type of investment involves not only cross-border payments, but also multiple levels such as the design of access paths, tax compliance disclosure, and division of legal responsibilities. If there is no corresponding legal structure or holding entity, not only will the investment be difficult to implement, but it may even be directly blocked due to identity, account or tax issues. Family offices, especially those with trusts, SPVs and overseas holding chains, are precisely the "universal channels" most commonly used to penetrate multiple jurisdictions.

Secondly, under mainstream regulatory systems such as the SEC and SFC, many structured products are limited to "qualified investors" - this is both a threshold and a protection.

The family office naturally has a "compliant identity": it can act as a legal entity to conduct institutional investment, and as a legally qualified investor to undertake complex equity arrangements such as future token issuance, income certificates, and tokenized equity. This compliant identity not only avoids the red line of retail investor participation restrictions, but is also a prerequisite for gaining the trust of the project party.

Third, the investment rhythm of family offices naturally matches the life cycle of RWA assets.

RWA is not a quick-in-and-out transaction, but an asset management process of "construction period - operation period - exit period". The advantage of family offices is that they do not pursue short-term returns, but are better at long-term strategies of "budget - execution - adjustment". Compared with retail investors and traditional VCs, family offices not only accept asset lock-ups and phased exits, but will even actively cooperate with the project rhythm to reinvest and increase holdings, thereby obtaining a more stable equity distribution.

Fourth, the family office is not just a pure investor, but also a governance capital that can be “embeddedly involved”.

In projects with governance structures such as RWA, family offices not only provide funds, but may also assume multiple roles including financial auditing, trusteeship, governance supervision, and even holding entities on behalf of others. They deploy resources with "family interests" as the core, are willing to invest in long-term collaborative teams, and are more likely to obtain institutional authorization and collaborative division of labor from project parties.

More importantly, the inherent characteristics of family offices are naturally close to the compliance evolution direction that Web3 is currently promoting:

• Large amount of funds and stable style: Family offices usually have funds ranging from tens of millions to billions of US dollars, prefer medium- and long-term allocations, have tolerance for fluctuations, and do not rely on short-term speculation returns;
• High compliance requirements and slow prudent decision-making: Family offices are generally equipped with legal, tax, and trust teams, and are "picky buyers" who promote Web3 compliance disclosure and clear asset structure;
• Clear asset preferences. Predictable returns, controllable structure, clear laws, and transparent governance: this is exactly what emerging products such as RWA, DePIN, and fund tokens are striving to align with.

From this perspective, family offices are not "old capital" that mistakenly enters the new world of Web3, but rather one of the most suitable long-term capital types after Web3 moves towards structuring, compliance, and value precipitation. Especially when RWA is regarded as the node of "this round of grand narrative", the entry of family offices is not the edge of the trend, but the core of the trend.

Conclusion

In the past, we often said that what Web3 lacked was funding, channels, and awareness. However, with the intervention of the Home Office, these three issues are being quietly responded to by a more mature governance framework.

Whether it is a cross-jurisdiction compliance framework, a structured investment rhythm, or complex asset management capabilities, family offices essentially do not provide a specific product, but a capability system that is adapted to long-termism.

Because of this, it can penetrate the seemingly chaotic appearance of Web3 and calmly build a bridge connecting real assets and on-chain rights.

But it is worth noting that family offices are not a universal solution. They have extremely high requirements for capital size, governance capabilities and structural sensitivity.

In the next article, Portal Labs will continue to analyze: What kind of investors are suitable for the family office path? And how to set up a truly "usable" family office structure?