Citigroup Inc, one of the world’s largest banks, is betting on wealthy Middle Eastern family firms who are in expansion mode to boost its private bank business, senior executives said.
Citi’s family office unit is part of the private bank business which manages over $250 billion in assets and serves over a third of the world’s billionaires.
Citi first moved into the market for family offices – mini financial institutions set up by rich families to manage their affairs – in 2010 when it set up a unit to cater to them. In March this year the bank appointed Anthony Habis, a managing director at its institutional clients group business, to head the family office coverage in the region.
Many of the families own businesses which are corporate banking clients of the group. The families themselves have now started to diversify away into sophisticated asset classes and have become more institutional in their operations.
A key market for Citi’s family unit is the Middle East, home to some of the world’s oldest family businesses like Dubai’s Al-Futtaim Group and Saudi Arabia’s Olayan Group, who controls lucrative businesses such as oil and gas and automobiles.
“What we are seeing is that the old money has become more progressive and more institutional in the thinking and there is a big push to build out the capabilities,” Habis said in an interview.
“You are seeing some of the largest family offices setting up in Geneva, London and New York which wasn’t the case earlier. They are being smarter with the money they spend,” said Habis, who took up the new role in March.
Industry-wide assets under management for single-family offices stood at about $1.2 trillion in September 2011, while multi-family funds had assets of $777 billion in December 2012, according to a study by Boston-based Cerulli Associates.
Middle East clients have toned down their aggressive return expectations and are now focused on wealth preservation, capital protection and estate planning instead, Habis said.
Broadly speaking, family office clients around the world are looking for more cross-border investment opportunities and generally tend to prefer real estate investments, said James Holder, head of family office for Europe, the Middle East and Africa at Citi Private Bank.
“In an environment where families are worried about currency, debasing of currency values globally, where there are many different risks, families seem confident owning real estate,” Holder said, adding the bank is scouting for real estate investments in the United States and Britain on behalf of its clients.
“We also see more interest in Madrid and Spain as well on real estate,” he added.
Citi has also recently hired key personnel across Europe for its family office business. The bank named Markus Von Wallenberg from Credit Suisse as head of family office coverage for German speaking Europe, Thor Askeland from Barclays as head of Nordics and Francesco Lombardo di San Chirico to run Italian operations for the family unit.
“We feel comfortable that we have got to a point across EMEA region where our key family office personnel are in place,” Holder said.