What Is a Family Office? Definition, How It Works and Examples

What is a family office and how does it work? In structure, it is a company, often an LLC (limited liability company), owned by the family and staffed by employees. It has one purpose: to manage the family’s money the way an institution would, without paying an institution to do it. The person whose wealth it serves is the principal. The family members, trusts, foundations and holding companies it serves are its clients.

A family office differs from a private bank or an adviser in who works for whom. A wealth manager serves many clients and is paid by them. A family office is owned by its single client and employs its own staff. Its work usually covers four areas.

• InvestmentAsset allocation, choosing outside fund managers, and direct deals in private companies, property and credit.
• Accounting and reportingThis is what a family office in accounting means: consolidated statements across every entity, partnership accounts, cash management and bill payment.
• Tax and legalReturns, entity structuring, trusts and estate planning, usually with outside lawyers and accountants.
• Family and philanthropyFoundations, governance between generations, and sometimes the household’s own administration.

A family office business is therefore a cost center with one shareholder. It earns nothing from clients. It is worth having only if what it saves, earns or controls for the family exceeds what it costs to run.

In the US, a family office is defined by Rule 202(a)(11)(G)-1 under the Investment Advisers Act. The SEC, the US securities regulator, adopted it in June 2011. At the time, the Dodd-Frank Act was bringing hedge fund managers into SEC registration. A family office that meets the rule “shall not be considered to be an investment adviser.” So it does not register with the SEC or file Form ADV, the adviser’s registration form. It must meet all three conditions:

1. 1.0
   Only family clientsFamily members, former family members, key employees, and the trusts, estates, charities and companies they own. A non-family client may arrive through a death or another involuntary transfer. It then counts as a family client for one year.
2. 2.0
   Owned and controlled by the familyWholly owned by family clients and exclusively controlled by family members or family entities.
3. 3.0
   Not holding outIt does not present itself to the public as an investment adviser.

“Family member” is a wide term. It covers all lineal descendants of a common ancestor, including adopted children and stepchildren, and their spouses. The ancestor can be no more than ten generations removed from the youngest generation. A “key employee” is an executive or an investment employee who has done that kind of work for at least 12 months.

Two Documented Family Office Examples

Soros Fund Management is the case study of the rule at work. In July 2011, it said it would return roughly $1 billion to outside investors and become a family office. That was a small part of the $25 billion it oversaw. Jonathan and Robert Soros wrote to investors that it would “no longer be able to manage assets for anyone other than a family client as defined under the regulations.” In the same period, CNBC reported, Stanley Druckenmiller and Carl Icahn had also returned outside money.

MSD Partners shows the opposite direction. Its successor firm says it invested from 2009 on behalf of Michael Dell, his family and like-minded investors. In 2023, it combined with BDT & Company to form BDT & MSD Partners. That firm’s advisory entities are registered with the SEC. Outside capital is what moves a family’s investment firm from the exclusion into registration.

What is a family office in investing, compared with a fund? A fund has outside investors, a fixed life and a mandate it cannot leave. A family office has none of the three. It can hold a company for decades, write a check without a committee of limited partners, and change strategy when the family does. A family office can offer a founder that patience, and a fund cannot. Family office investment in private companies takes four forms.

Through funds

As a limited partner in venture, growth or buyout funds. GP vs LP explains the LP seat. The fund draws the commitment over years through capital calls.

Co-investments

Alongside a fund in one of its deals, usually on lower fees, when the manager offers the allocation.

Single-deal vehicles

A share of a structure formed to hold one company. See SPV investing. This is how a family office reaches a late-stage round it could not join alone.

Direct

Buying shares from the company in a round, or from an existing holder in a secondary sale, with its own team checking the deal.

Are family offices institutional investors? Not as a legal category of their own. Still, US securities law treats a qualifying one as a sophisticated buyer. Under Rule 501(a)(12), a family office is itself an accredited investor, one allowed into most private offerings, if three things hold. It has more than $5 million under management, was not formed for the deal and is directed by an experienced person. Its family clients qualify through it. Some family offices also lend: direct loans and other private credit can sit alongside the equity.

Axevil works with investors qualified under US rules and equivalent regimes, and runs one dedicated Delaware SPV per deal. The wealth managers page describes how advisers and family offices use the same structures across client portfolios.

Most of the cost of a family office is fixed. People, systems, audit and legal work cost roughly the same whether the office manages $200 million or $2 billion. So the cost as a share of assets falls as the family’s wealth rises. The question is always the same: at what size does building one beat buying the service from a multi-family office or a private bank?

Common Mistakes

• Taking an outside clientEven one unrelated client can take the office outside the exclusion and into adviser registration.
• Counting only investment returnsAccounting, tax and governance are most of the work and much of the value.
• Building too earlyBecause costs are fixed, a small office can cost more than a multi-family office charges.
• Assuming the US rule travelsOther jurisdictions regulate family offices on their own terms.
• Treating patience as liquidityLong-horizon private positions still need cash planning for taxes and family needs.

Family office

A company owned by one family that manages that family’s wealth. In the US, it is excluded from the Advisers Act if it meets the SEC’s rule.

Single-family office

A family office serving one family only. This is the form the SEC exclusion covers.

Multi-family office

A firm serving several unrelated families, usually regulated as an investment adviser.

Principal

The person, or generation, whose wealth the family office was set up to manage.

Family client

Under the SEC rule: family members, former family members, key employees, and their trusts, estates, charities and companies.

Key employee

Under the SEC rule: an executive or investment employee with at least 12 months in such a role.

Co-investment

An investment made alongside a fund in one specific deal, outside the fund itself.

Accredited investor

The US category most private offerings are limited to. A family office with over $5M under management can qualify.

Rules and figures were last checked on October 2, 2026, against the current text in the eCFR, the official online Code of Federal Regulations. The rules described are US federal rules. Other jurisdictions regulate family offices on their own terms. Examples are limited to firms whose status is documented in a source listed below.