Why ETFs alone are not enough for a family office portfolio
In recent years, investment committees in family offices have started to recommend ETFs as the default. That is a strange answer to the wrong question. A family's target is not the index.
Across several of the investment committees our partners attend, the recommended default for public-equity exposure has converged on ETFs and index-driven funds. It is worth asking why — and whether it serves the family.
Families do not invest to beat the market. Nor do they invest to mirror it. Their objective is simpler, and far more demanding than either: to grow capital across generations, at a rate that will still meet the family's real needs in twenty-five years. That target is absolute, not relative.
Against that target, a purely passive approach sits uncomfortably. Buying an index means accepting the market's outcome — good or bad. If the index is up 20%, the family is pleased. If the index is down 10%, the family is down 10% too, with no one around the table prepared to defend a different view.
What is missing in that posture is conviction. Is there still someone in the room with a considered price at which they would buy LVMH, and a price at which they would sell? A price at which Vodafone is cheap, and a price at which it is rich? Families are not themselves stock-pickers — but they need professionals who are. A family that only holds the thermometer is not actually investing. It is measuring. That is not the same thing, and over the long horizon, it tends not to produce the compounding families need.
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