A Case of an Asian Family Office

A Reflection on Asher Noor’s AlTouq Group By Virgilio Paralisan

Asian Family Enterprise Excellence Conference or AFEEC 2021

A family office is like any company, but privately held. This company manages the wealth and investment of a family in business or a family of wealth. It helps businesses grow and be able to pass on to the next generation. The family office is created purposely to avoid future business complications and mismanagement of a large family enterprise.

The family office concept started to become popular and distinguished globally. They are on demand given the economic condition and flexibility.

Let me give you a perspective of what a family office is like. Last June 25-26, 2021, we organized the Asian Family Enterprise Excellence Conference (AFEEC). We had the whole conference online. The 5th speaker on the first day was Asher Noor, Chief Investment Officer of AlTouq Group.

Asher Noor is into all kinds of portfolio management. I'm referring to both traditional and alternative asset classes. Asher is into enterprise governance, treasury, budgeting, and financial analysis. He has served as an independent non-executive director in many boards.

His key role is to manage AlTouq Group which is a single family office based in Saudi Arabia. Asher leads the investment team. Through the AlTouq Group he establishes, implements and manages investment strategies, in sync with the AlTouq Group’s vision regarding asset allocation, expected returns, and risk thresholds.

His role in the Group requires restructuring their back-office, managing a holding and subsidiary companies, risk controls, implementing accounting systems, and compliance to International Finance Reporting Standard (IFRS).

If there’s someone who can talk about an example of a family office, Asher Noor is it!

wealth and investment of a family in business next generation and private company

The AlTouq Group

In 1970's, AlTouq Group established a Family Office in Saudi Arabia. Started investing in the financial market, and asset and wealth management.

With perseverance, AlTouq Group is able to build a portfolio of investments. It may be in real estate, private and public equity, and direct investments. To add, they also invested in an onshore and offshore vehicle.

They were able to build various positions. Also, recycled distributions back to the investment vehicle. Built and staffed family office that supports the accounting, legal, and compliance aspects.

Provides concierge services for the family. From travel issues, education, philanthropy, real estate, and managing different transactions and assets.

The founder sent his children to work outside and do internships overseas. Outside training equips the second generation in preparation for a position.

As the founder got older, he appointed his elder child as the CEO and brought in his spouse and six children. The founder distributed ownership via the special purpose vehicle (SPV) to the spouse and children. The founder still kept his voting rights.

Throughout the transition period, the patriarch still assisted his son. This hand holding continued until the son took control of the investment portfolio with the consent of the rest of the family members.

Hiring a Professional Non-Family Member

The second generation is handling the family office. They made another big decision. They brought in a non-family member as a professional to work as the CFO/CIO capacity. And that person is Asher Noor, our keynote speaker. He is a professional serving a family enterprise.

An outside professional gives a fresh perspective. Outside professionals are not conflicted when it comes to certain governance or investment decisions. These professionals don’t have the emotional attachment to some of the legacy investments.

Hiring an outside professional can also be crucial in the family office. Systems may change as the outside professional delivers the rationale. Other family members might not agree with the new plans and directions. Resistance is possible from its stakeholders.

Onshore and Offshore Jurisdiction

The family is what we call an ultimate beneficial owner (UBO) with a brand and legit source of income. The family is constantly looking for some credible onshore and offshore jurisdictions. Setting up another office for that jurisdiction is another thing. It may go wrong but still it's manageable.

You might be wondering what is this UBO or Ultimate Beneficial Owner? The UBOs are individuals with significant influence or control over a business. In most country jurisdictions, the threshold for you to be a UBO is at least 25% ownership. Your company must report it in the jurisdiction where it operates.

Failure to make this report will mean significant penalties and even criminal prosecution. These regulations discourage money laundering.

As the business goes through, they may have found breadcrumbs. but still are able to sustain the family. They put large efforts in keeping the business afloat.

The patriarch prefers to set up a special purpose vehicle (SPV). The founder prefers it rather than holding investments in his personal name. He kept the voting rights to himself even when he had given away his shares to his next of kin.

Investment can carry significant risks. Asher is responsible for minimizing these risks. One of the tools to address risks is the SPV.

SPVs isn't referring to any kind of car. They are actually companies. These subsidiary companies quarantine risks that can affect the parent or holding company.

Advantages and Challenges of Setting up a Family Office

In setting up a family office, there are advantages and disadvantages.

The advantages are:

elimination of redundancies and having well defined rules
avoidance of business complications and mismanagement
well accounted financial affairs and assets
smooth transition of leaders
clear regulations between its family members

The disadvantages are:

time consuming and expensive process
complication in operating and structuring family office

As family office go along, it will face challenges and these are:

finding the right resources (professionals loyal to the family and next generation)
getting structure in place
lack of trust, resources and support

Asher Noor and his team were cited by TheTrustedInsight.com as one of the Top 30 family offices in 2016.

Wanting to set up a family office but don’t know where to start?

In Premier Family Business Consulting, we have a service called Family Enterprise Planning (FEP). We serve families by helping them professionalize and organize. Structure, define, and manage your family’s financial affairs and assets by talking to a consultant now!

A Case of an Asian Family Office