When it comes to achieving multi-generational goals, the ability of family offices to deploy patient capital is critical. George Varoutsis, Head of Investment Management — US & Europe International at Deutsche Bank Private Bank, explains the factors that enable single-family offices (SFOs) to “ride supercycles” and take a genuinely long-term investment view.
Establishing a family office allows wealthy families to invest with a genuinely long‑term mindset. With a single source of capital, the strategy can fully reflect the family’s values and multi‑generational goals, without quarterly performance pressure.
This is where SFOs have a structural advantage. Working with one family’s capital makes it easier to maintain for a long duration than in multi‑family offices or funds, where “you need to hit your numbers for the year”, says Varoutsis.
Governance, values and multi-generational objectives
Legal and governance structures play a crucial role in enabling family offices to hold capital with for the long term. The office must be fully aligned with the ultimate beneficial owner’s (UBO’s) values, long‑term goals and how they want their wealth to evolve across generations.
A disciplined investment framework requires the right mix of expertise and a well‑constituted Investment Committee, says Varoutsis. Many families appoint an independent chair to ensure an “arm’s‑length” decision‑making process.
“Governance is very important because you want the UBO to rely on a robust investment process, led by the Investment Committee,” he says. “You need a structure that supports that mindset. The UBO sets their goals, typically with a multi‑generational perspective, and those objectives guide the committee.”
Structuring a family office to pursue long-term goals
A long-term approach to investing – unconstrained by short-term performance pressure – can be a defining advantage for a family office. With no external investors to satisfy, families can stay invested through full cycles and act purely on long‑term conviction.
Strategic leverage has started to become a core consideration for family offices.
George Varoutsis
Head of Investment Management — US & Europe International
Liquidity from the operating business is central to this. “Smart beneficial owners usually have two pockets,” says Varoutsis. “There’s the business they run, where they take risks to pursue growth. And there’s the family office, designed to deliver a different return profile – ideally uncorrelated to the business and kept as separate as possible.”
This structure gives families the freedom to adopt flexible time horizons, holding assets for as long as the opportunity requires and avoiding forced liquidity. “You can ride cycles and even supercycles,” he adds. “Family offices can ask not only ‘what’s going to happen in 10 years?’ but also ‘what’s my 50‑year view?’”
Varoutsis cites the example for illustrative purposes of one family office that invested in distressed assets. “Whereas a hedge fund would have potentially got out after a year or two, the family office waited five to 10 years to generate a 20-30% Internal Rate of Return (IRR),” he says.
This ability to hold through full cycles is what may turn volatility into opportunity in certain situations, but it is an approach that is not suitable for all investors.
How family offices are becoming more strategic in the use of leverage
Inflows of cash from the operating business also create significant purchasing power. This potentially allows family offices to move quickly to close global real-estate deals, for example, and consider leverage only once the asset has been secured. This freedom from short‑term funding needs makes it easier to hold assets through downturns and allow value to compound.
While many family offices have traditionally not used much leverage, that is changing. “Strategic leverage has started to become a core consideration for family offices,” Varoutsis states. “Having it available increases purchasing power even further and allows families to be even more patient, because they can tap it selectively when specific opportunities arise.”
This flexibility is increasingly visible in the sports sector, where many families are pursuing minority or controlling stakes as long‑term conviction assets. Even when Deutsche Bank is working on a leverage facility or letter of commitment, families often make the initial investment in cash – preserving optionality to add leverage later.
Why investing for the very long term requires advanced risk management
In theory, a “patient capital” approach to investing helps to avoid crystallising losses during market dislocations and provides extra time for well-managed holdings to recover. In practice, advanced risk management is required to prevent significant drawdowns from forcing sales at the wrong moment.
Investing for the very long term requires a resilient risk management framework and consistent ongoing discipline in the way risks are managed, Varoutsis explains. “Without good risk management, you don’t have patient capital – and vice versa.”
Yet family offices are well-suited by their nature to taking this approach. Their ability to focus on long-term outcomes and worry less about short-term volatility gives them the ability to seize opportunities that others cannot – and increase their chances of building wealth that endures across generations.
