Mistaken entry? Adaptation! Why family offices have become key players in Web3 investment?

Another answer to the investment structure of Web3.

Written by: Portal Labs

In recent years, family offices have been gaining popularity among high-net-worth individuals in China.

As early as 2022, according to the "2022 China Family Office Industry Development Trends White Paper" jointly released by Credit Suisse and Hurun Research Institute, the number of institutions named "family office" in China has approached 10,000, more than doubling year-on-year, mainly concentrated in cities such as Shanghai, Shenzhen, Beijing, and Hangzhou.

At the same time, the Monetary Authority of Singapore (MAS) disclosed that as of the end of 2023, the number of registered Single Family Offices (SFOs) in Singapore has surpassed 1,100, an increase of more than three times compared to 2020. Among these, over 40% of the founders are high-net-worth families from mainland China and Hong Kong.

The rapid expansion of family offices has also brought about structural changes in asset allocation preferences.

The "2024 Asian Private Wealth in Digital Assets Report" points out that during 2024, the allocation of digital assets among several high-net-worth individuals and family offices has increased from less than 5% to over 10%, with plans to further increase in the next 12 months. The "2024 Global Family Office Survey Insights" report released by Citi Private Bank also shows that about a quarter of the surveyed family offices have invested or plan to invest in digital assets, with the Asia-Pacific region leading in this area, as 37% of respondents have already engaged in or expressed clear interest in it.

Portal Labs has also mentioned in previous articles that for high net worth investors in China, family offices may be the key vehicle for entering Web3 investments. However, to understand why family offices can naturally align with Web3, we need to go back to the basics: what problem do family offices actually solve?

What is "Family Office"?

In the world of high net worth individuals, family offices (hereinafter referred to as family offices) are regarded as the "ultimate form of asset governance."

It is not a financial product, nor is it some kind of institutional service, but rather a comprehensive management system built around family wealth, or simply understood as an organizational structure that serves the family itself.

According to different management methods and service entities, family offices are further subdivided into the following typical types in practice:

1. Single Family Office (SFO)

The most common form of family office, established by a single high-net-worth family, serving exclusively the members of that family.

SFOs typically have dedicated teams responsible for various aspects such as asset allocation, tax planning, legal affairs, inheritance arrangements, and charitable management. Its advantage lies in "complete autonomy and comprehensive control," but the establishment and operational costs are high, making it suitable for ultra-high-net-worth families.

2. Multi-Family Office (MFO)

Established by professional institutions, serving multiple families, usually building teams based on financial institutions, law firms, and trust companies.

The advantages of MFO are "resource sharing and professional services," which can cover core needs such as investment advisory, family governance, and legal structure, while also reducing labor and operational costs, making it suitable for high-net-worth families.

3. Virtual Family Office (VFO)

It is not an independent institution, but a combination of outsourced professional services, such as hiring family trust consultants, tax advisors, financial advisors, etc., forming an external collaborative network that creates a "lightweight" operational structure.

The advantages of VFO are "flexibility and pay-as-you-go," making it suitable for families at the initial stage of starting a family office.

4. Overseas Family Office (e.g., Singapore SFO)

In recent years, a cross-border framework path has emerged, commonly seen in high-net-worth individuals from mainland China establishing SFOs in places like Hong Kong and Singapore to meet their needs in global asset allocation, tax structure optimization, and identity planning.

This type of family office usually combines domestic family members, offshore company structures, and overseas financial service resources to create customized solutions that ensure regulatory compliance while maintaining a global perspective.

However, even though the types are different, the common goal is that the primary objective of family offices is not to pursue short-term gains, but to build a dedicated management system that can withstand cycles and adapt to intergenerational inheritance. Therefore, in terms of functional design, family offices usually focus on building around the following core modules:

• Tax and legal structure design. Optimize tax costs and avoid compliance risks through cross-border entities, trusts, fund structures, etc.;
• Asset allocation and investment management. Establish long-term investment strategies, integrating various asset types such as real estate, equity, funds, and digital assets;
• Family governance and inheritance mechanisms. Establishing equity, dividend, inheritance, and education plans to realize the continuity of family will;
• Daily administrative and operational support. Covering "full custody" services such as legal consulting, secretarial teams, accounting services, and even health management.

However, as Web3 and cryptocurrency assets gradually enter the mainstream, family offices are also being confronted with a brand new asset structure transformation. The high volatility and high technical barriers of cryptocurrency assets seem to contradict the concept of "stable inheritance." Yet it is precisely this system, which emphasizes governance structure, resource allocation, and a long-term perspective, that gives family offices a natural advantage in what appears to be the least compatible area.

Why is it "family office"?

The reason family offices can naturally align with Web3, especially in the investment path of assets like RWA, lies in the fact that it is essentially a governance system born for "complexity".

First of all, the underlying structure of RWA projects often spans across regions, laws, and currencies.

Whether it is through tax bonds issued in the United States or tokenized real estate under the Singapore structure, this kind of investment involves not only cross-border payments, but also multiple levels such as deposit and withdrawal path design, tax compliance disclosure, and legal liability division. If there is no corresponding legal person structure or holding entity, not only is it difficult to land the investment, but it may even be directly stuck due to identity, account or tax issues. Family offices, especially those with trusts, SPVs and offshore holding chains, are the "common channels" that are most commonly used to penetrate multiple jurisdictions.

Secondly, under mainstream regulatory frameworks such as the SEC and SFC, many structured products are limited to the scope of "qualified investors"—this is both a threshold and a protection.

Currently, the natural identity of compliance is established: it can serve as a legal entity for institutional investment, and also as a legally qualified investor to undertake complex equity arrangements such as future Token issuance, revenue certificates, and tokenized equity. This compliant identity not only allows avoidance of the red lines restricting retail participation but is also a prerequisite for gaining the trust of project parties.

Thirdly, the investment rhythm of family offices naturally aligns with the lifecycle of RWA assets.

RWA is not a fast-in, fast-out transaction, but an asset management process of "construction period - operation period - exit period". The advantage of family offices is that they are not chasing short-term returns, but are better at doing a long-term strategy of "budget-execution-adjustment". Compared with retail investors and traditional VCs, family offices not only accept asset lock-up and stage exit, but even take the initiative to reinvest and increase their holdings according to the pace of the project, so as to obtain a more stable equity distribution.

Fourth, family offices are not merely pure investors; they can also be governance-oriented capital that participates in an "embedded" manner.

In projects like RWA that have governance structures, family offices not only provide funding but may also take on multiple roles, including financial auditing, custody, governance supervision, and even holding entities on behalf of others. They deploy resources with "family interests" as the core, are willing to invest in long-term collaborative teams, and find it easier to obtain institutional authorization and collaborative division of labor from the project parties.

More importantly, the endogenous characteristics of family offices are naturally aligned with the direction of compliance evolution currently being promoted by Web3:

• Large capital size and stable style: Family office funds typically range from tens of millions to several billion USD, preferring medium to long-term allocations, possessing the ability to withstand fluctuations, and do not rely on short-term speculative returns.
• High compliance requirements and slow prudent decision-making: Family offices are generally equipped with legal, tax, and trust teams, which are the "picky buyers" who promote Web3 compliance disclosure and clear asset structure;
• Clear asset preferences. Predictable returns, controllable structure, clear legal framework, and transparent governance: this is precisely the direction that emerging products such as RWA, DePIN, and fund-type Tokens are striving to align with.

From this perspective, family offices are not a type of "old capital" mistakenly entering the new world of Web3, but rather one of the most suitable types of long-term capital after Web3 has moved towards a structured, compliant, and value-preserving stage. Especially with RWA being regarded as a key point in this round of grand narrative, the entry of family offices is at the core of the trend, not its periphery.

Conclusion

In the past, we often said that Web3 lacks funding, channels, and awareness. However, with the involvement of family offices, these three issues are being subtly addressed by a more mature governance framework.

Whether it is a cross-jurisdiction compliance framework, a structured investment rhythm, or a composite asset management capability, family offices essentially provide not a specific product, but a capability system that adapts to long-termism.

It is precisely for this reason that it can penetrate the seemingly chaotic surface of Web3 and calmly build a bridge linking real assets with on-chain rights.

However, it is worth noting that the family office is not a one-size-fits-all solution, and it has extremely high requirements for the volume of funds, governance capabilities and structural sensitivity.