Family Office Connect 2017

1 Family Office Connect 2017 James Burkitt, 1 The Table Club Family Office Connect 2017 Welcome to Family Office Connect (FOC). FOC is the annual report produced by The Table Club, a Family Office network that works on behalf of Family offices worldwide. The Table Club has utilized publically available information to provide an analysis of the Family Office sector for those wishing to learn more about this unique investor base. Confidentiality The Table Club has excellent relationships with many of the top SFOs and at all times respects the confidentiality of information gained through these relationships. The sources of information are from public available information and any confidential information is excluded from our reports.

2 Family Office Connect 2017 James Burkitt, 2 The Table Club Introduction Our review looks at the entire Australian Family Office sector and estimates there are some 350 Single Family Offices, (SFOs), with a total wealth of roughly $305 billion as of June 2017 . The range in wealth is $ billion to $200 million. Our analysis in this report focuses on the Top 200 within this universe. Data & Review Methodology The Table Club has composed this review of the Australian Family Office sector using data from a variety of sources including proprietary research, the AFR Rich List (May 2017 ), Forbes Asia, the Australian Bureau of Statistics and All Ordinaries. Additionally, we have used the values in the most recent Forbes Top 400 list, (October 2016) to compare the US market.

3 The composition of the sector assumes that each Ultra High Net Worth (UHNW) has a Single Family Office (SFO). To qualify in the Top 350 each SFO must have gross assets > $200 million. We feel that in most cases, $200 million is the minimum required to establish a Family Office with adequate resources for operating and investing. These resources are either dedicated just for the SFO or may be shared with operational businesses. Table 5 below shows a list of SFOs in detail for the Top 200. To estimate the balance of the SFOs/UHNW s to the Top 350, we have assumed an average wealth of $275 million based on the range of the balance of SFOs as $200 million to $350 million. Two of the SFO groups have been consolidated for this report.

4 These are Smorgon, (8 separate SFOs), and Liberman, (4 separate SFOs). There are also a number of Multi Family Offices included (MFOs). Family Office Connect 2017 James Burkitt, 3 The Table Club Size of the Family Office Market in Australia The Top 200 SFOs in Australia now account for $ billion. This is an increase of $ billion from June 2016 or This significant one year rise in wealth is likely attributable to the commensurate rise in property prices over the same period, a sector that 30% of the Top 200 are primarily invested in, with most others also having significant holdings. That said, there has been a general lull in resources prices, which has affected the 8% of the Top 200 that derive their wealth primarily from that industry.

5 Table 1 below shows the respective market sizes for the Top 20, 50, 100 through to the Top 350 SFOs. Table 1: SFO size analysis by ranges. To put the Australian market into an international perspective, we are still a smaller universe than well-established Family Office markets such as the USA, Europe and parts of Asia. The recent Forbes Top 400 rich list for the US had US$ billion as the cut off. The average wealth was US$6 billion for a total universe of US$2,400 billion. In Australia, we have 66 billionaires with average wealth of AU$ billion and total wealth of AU$ billion. Ranges July 2014 ($ billion) January 2016 ($ billion) June 2017 Top 20 Top 50 Top 100 Top 150 Top 200 Top 350 Family Office Connect 2017 James Burkitt, 4 The Table Club Geographic Location of Family Offices There has often been the impression that Melbourne had the majority of the Family Office money.

6 This was certainly true in terms of our largest companies, such as mining houses BHP and Rio Tinto, who were substantially started in Melbourne with old money backing by families like the Baillieu Family . In recent years there has been a shift in the location of wealth to NSW, with more Family Office money being held in NSW during the 2012-2016 period. However, the wealth numbers as of June 2017 evidence a shift back to Melbourne, with around 5% more of the Top 200 wealth being based in Melbourne. It is suggested that this fluctuation is down to individual families specific performances, rather than any particular trend. The conclusion to be drawn is that the great majority of Family Office wealth is equally distributed between Sydney and Melbourne.

7 Looking at Table 2 below, we see that the wealth of SFOs for the Top 200 in Sydney and Melbourne is larger in Melbourne, with $ billion and $ billion respectively. This is commensurate with the number of Family offices in each location, with Sydney having of the Top 200 Family offices, together holding of the total wealth of the Top 200, and Melbourne having of the Family offices holding of the wealth. In terms of distribution, there is a slightly greater proportion of Melbourne-based families at the top end of the Top 200, with a greater proportion of Sydney-based families at the lower end. Table 2: Top 200 SFOs by State Location Wealth ($ million) % of total wealth No. of Family Offices % of Family Offices ACT 1000 1 NSW 82127 64 QLD 21770 24 SA 1650 2 TAS 947 2 VIC 94776 69 WA 33871 18 Overseas 30756 20 Total 266898 200 One notable trend is the fall in Family Office money based in WA.

8 This can be attributed to the fall in the resource sector given that a significant proportion of WA Family offices have their wealth in resources. In particular, the fall in Gina Rinehart s wealth from $29 billion, at the height of the resources boom in 2012, to $ billion as of June 2017 has a disproportionately large effect on the wealth distribution by location. This fall in WA-based Family Office money has been offset by strong growth in the other states, and particularly the traditional Family Office strongholds of Melbourne and Sydney. This is in part due to a number of successful families creating wealth. However, it is also attributable to resource-focused Family offices diversifying their wealth into other sectors; an activity that usually involves establishing a base in Sydney or Melbourne so as to have greater access to the desired diversification.

9 Family Office Connect 2017 James Burkitt, 5 The Table Club It is also worth noting that a significant portion of Australian Family Office money is now held by those that reside overseas, especially in China. As shown in Table 2, this amount currently amounts to $ billion, or of the Top 200 s wealth. These Family offices have principals that hold Australian residency, but nevertheless conduct their operations overseas to a significant degree. One of the trends of the European and some of the Asian Family offices has been to set up offices in other parts of the world to better manage their affairs. Most recently, a number have chosen Singapore as a safe hub to cover the Asian markets, (Parly Group is a good example out of Switzerland).

10 On the Australian Family Office side, we have families with investment resources on the ground in other parts of the world, (Portland House London, Lowy NYC, Saunders NYC and Roberts NYC). As more capital is deployed offshore to take up the currency strength and distressed opportunities, we see the trend to have resources offshore to continue. Family Office Connect 2017 James Burkitt, 6 The Table Club Generational Dynamics The Australian Family Office sector is largely still controlled by the 1st and 2nd generations. When we look at the Top 50 SFOs by wealth, the concentration is quite dramatic; the great majority of the wealth in the top 200 is in the hands of the 1st generation that created that wealth.