Tiedemann discusses family office trends in Dallas in the Dallas Business Journal

Dallas Business Journal

First-generation wealth, entrepreneurial minds seen to be driving family office surge in Dallas

By Rebecca Ayers

February 11, 2020

Dallas is one of the country's top cities with the highest number of family offices in the U.S., a recent study shows.

Dallas and Texas ranked at No. 3 for on the list from FINTRX for cities and states respectively with the most family office shops.

FINTRX, which was founded in 2014, provides professionals with access to family office data. The study is the first part of its “industry briefing series” that examines the family office industry by mapping out its locations and assets.

Tiedemann Advisors’ Managing Director Colin Carter said in an interview with the Dallas Business Journal that, although he doesn’t necessarily think that people are relocating to Dallas to start a family office, he does think that Dallas-Fort Worth is a rapidly growing region with a diversified economy.

“I think it's unprecedented that we're having this organic wealth creation in Dallas that's giving rise to these individuals and families that have hundreds, if not several hundreds of millions of dollars of newly found liquidity or newly created liquidity,” Carter said.

The study found that 40 percent of wealth creators behind a family office are going to be either in the private investing and financial services industry or an entrepreneur. Individuals that come from inherited wealth and have family offices make up 14.3 percent of the industry.

Carter said that Dallas tends to have more first-generation wealth creators when compared to the East and West Coasts that often have family offices that come from multi-generational wealth.

“There's very much an entrepreneurial attitude in Dallas. We're probably growing faster than most areas of the country,” he said. “When there's a liquidity event or a new family office is started, it tends to be someone from a very entrepreneurial background or a first-generation wealth creator.”

Family offices are often investing mostly in private equity and then hedge funds the report’s findings show, with 77.6 percent of assets going to private equity and 70.2 percent go to hedge funds.

“We see less interest in hedge funds now than we did at least five or six years ago, and that may be cyclical,” Carter said. “Hedge funds may start to outperform the public markets and more passive investing going forward.”

FINTRX Founder and Chief Executive Officer Russ D'Argento said that the data firms used a “bottom-up approach” that examined more than 11,000 family office individual professionals and 2,700 family offices. In Texas, the firm was able to look at more than 550 family office professionals and about 150 family offices. The firm has the largest family office data set in the industry, according to D’Argento.

Across the board, D’Argento said he’s finding that family offices, especially single family offices, are actively investing more in direct deals into private companies and acting as “wealth-generating vehicles versus wealth protectors.”

“That also runs in line with the family office market as a whole: continuing to mature, becoming more sophisticated and transforming from a cottage industry into a maturing, well put-together, well-designed entity that almost feels and looks oftentimes like small institutions,” he said.

In the rankings, New York took the top spot with 18 percent of family offices in the U.S. It was followed by Chicago with 3.9 percent. Houston was the only other Texas city to make the list. For a look at the top 10 cities accounting for the most family offices, see the gallery at the top of this story.