When AbdulMohsin Omran Al Omran founded The Family Office almost 10 years ago in Bahrain, the idea of financial advice and succession planning for the ultra-wealthy was fairly new.
The Family Office helps make a new investment tradition
When AbdulMohsin Omran Al Omran founded The Family Office almost 10 years ago in Bahrain to service the region's network of home grown conglomerates, the idea of financial advice and succession planning for the ultra-wealthy was fairly new.
Today, The Family Office has almost US$1.5 billion (Dh5.5bn) worth of assets under management and regulated in Bahrain, New York, London and Hong Kong.
"We are still the only one doing this," said Mr Al Omran, the chief executive of the multifamily firm who comes from a prominent merchant family in Saudi Arabia.
"The reason is because it's not a high-margin business. It's a long- term family relationship that requires a lot of investment, but the revenues are going to come over the next 10,15 and 20 years, as opposed to high-margin financial products offered by the global investment banks," says Mr Al Omran, who worked for the leading banks Goldman Sachs and Investcorp of Bahrain.
The office has benefited from a marked shift in the investment culture among Arabian Gulf merchant families as more of them invested their money abroad after the Arab Spring unrest began.
"Gulf families have thought about 'what if?' scenarios and there's a very clear trend no doubt, an irreversible one," said Mr Al Omran.
Bahrain, a major financial hub in the region, experienced a capital outflow as assets from the banking system declined to $201.1bn in September, from $222.2bn at the end of 2010, before protests there began. Dubai emerged as a haven, on the other hand, as deposits in 2011 touched double digits for the first time since the global financial crisis. Private wealth outflows from the region are difficult to aggregate because of the opaque nature of family offices.
"In the past, families took their cash flows from their companies and recycled it to grow their market share and expand," said Mr Al Omran. "They took the rental income from their properties and bought more properties. They took dividends from their local stock portfolios and bought more shares. From time, to time, they would give some of their money to international private bankers in Switzerland, but it was insignificant to total wealth.
"But today, much of that money is being directed to their international portfolios, which is becoming a sizeable operation compared to their other businesses."
The multifamily firm has plucked top-notch investment talent to identify opportunities in a range of asset classes. For example, its clients have access to 116 companies in private equity in China. After the global financial crisis, they built up holdings in corporate debt and distressed properties in the United States.
"We have invested almost 50 per cent of clients' money in a downward market," said Mr Al Omran.
"When investors were dumping corporate bonds, we were buying. When property prices fell in the US, we were major buyers. Now people are coming in to buy properties and there's a bubble in the bond yields … we are starting to sell."