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18 October 2023

Family Office Portfolio and Partnership Accounting: the Essential Requirements

It’s estimated that there are between 6,000 and 7,300 family offices in the United States, according to Deloitte’s Protecting legacy: The value of the family office[1]. With this many entities, there are many approaches to investment management. The more intricate family offices generally invest globally in a wide range of asset classes, from fixed income and equities to hedge funds and private markets, thus creating accounting, operational, and reporting complexities.

With this complexity comes the need for comprehensive portfolio and partnership accounting solutions. Given the size of the market, there is a potential for AI and other new technologies to transform how this industry manages its operations. As Francois Botha from Simple discusses in Forbes[2], “Beyond mere efficiency, a robust technological intervention could usher in a new era for this sector, leading to streamlined processes, superior risk management, and unprecedented growth opportunities.”

What are the essential requirements for a family office?

For a family office, the right accounting solution should offer extensive asset class coverage, and multi-currency support. This type of technology enables organizations to efficiently handle diverse strategies within a unified platform, including physical assets and private collectibles. Moreover, there should be capabilities for integrated investor accounting and servicing that seamlessly interact with the portfolio accounting system. Integration streamlines the accounting processes and provides transparency for stakeholders, including family members and investment partners.

What are the accounting system requirements?

  • Broad Asset Class Coverage: The portfolio accounting system must be flexible enough to accommodate all the asset classes typically involved in the family office's investments. This includes assets managed by external managers and tangible assets owned by the family.
  • General Ledger: A built-in GL is crucial for generating a trial balance and essential for maintaining the office's accounting books and records.
  • Performance Reporting: Comprehensive performance reporting, including metrics like internal rates of return (IRR) and time-weighted return (TWR). This reporting should be flexible enough to break down performance by asset class, strategy, sector, or other relevant criteria.
  • Look-through Reporting: All involved parties should have access to detailed information on underlying holdings. This transparency helps stakeholders understand their actual ownership and the impact of specific holdings on performance and risk.
  • Partnership Accounting: Family offices often deal with various open-end and closed-end entities. The system should accurately allocate investment profits and losses among family members and other partners.

The Efficiency of Managed Services

Given the complexities of managing a family office, many prefer to avoid building the infrastructure internally; the managed services option enables family offices to have their core portfolio accounting and reporting technology available in the cloud. This reduces the upfront investment in internal infrastructure; there is no need to allocate substantial capital to build and maintain in-house systems. Additionally, it expedites the setup process, enabling family offices to become operational quickly. This rapid deployment is particularly valuable in today's fast-paced financial landscape, where quick decision-making can make a significant difference.

The modern family office must understand the essential accounting requirements for managing these diversified investments. Coupling the right accounting platform with a managed services offering paves the way for family offices to command their investment strategies and future growth.

Read our brief or request a demo to learn how SS&C can help empower your family office portfolio and partnership accounting.

[1]“Protecting Legacy The Value of a Family Office.” Deloitte

[2]Botha, Francois. “The Last-Mover Advantage: AI & Technology for Family Offices.” Forbes, Forbes, 29 May 2023