Middle East family offices look to OCIO model
Family offices in the Gulf Cooperation Council are increasingly looking to outsource their core investment functions according to experts in the region (Mariam Soliman/Undsplash)
For those familiar with the Middle East investment landscape, you’ll already know that family offices have been on the rise in recent years.
On one side, the region has seen an influx of high-net-worth individuals, with Dubai drawing a noticeable crowd. At the same time, the existing base of affluent Middle Eastern families has been setting up formal structures to manage their wealth.
This growth, and a few other reasons that we’ll come to later, has led to an interesting structural change: more outsourced chief investment officers.
Once reticent to externalise investment advisory, family offices in the Gulf Cooperation Council are now looking to outsource their core investment functions. Or so say the experts.
Both the DIFC, Dubai’s international financial hub, and the Emirates Family Office Association have recently noted a growing appetite for OCIOs from regional family offices.
But what do family offices in the GCC have to gain by using an OCIO model?
Supply tensions
One of the factors pushing family offices towards the OCIO model appears to be a question of supply tensions on the CIO market.
Despite an uptick in the quantity of GCC family offices, that growth hasn’t been matched by an increase in the number of CIOs in the region.
As such, Adam Ladjadj, vice chairman of the Emirates Family Office Association, says that single family offices are facing issues with the availability and costs of “human capital” for internalising the function.
Hiring and, more importantly, retaining high quality manpower for investment leadership is difficult. And this is particularly problematic for smaller family offices,
Prashant Tandon, managing director and co-founder of Lighthouse Canton Middle East, says.
So, the quest for the right CIO, at the right price, is one compelling reason for some family offices to consider OCIOs.
But that’s not the whole picture.
Another aspect to the growing interest in OCIOs is the generational transition at many family offices in the region.
Updated approaches
According to a report from BNY Wealth, more than half of GCC family office decision-makers are currently in the 25-to-34-year age range. And this recent change in leadership has brought about an updated approach to asset allocation.
Unsurprisingly, these new leaders are more willing to expand into new asset classes and geographies, incorporate innovative technology and allocate to more complex investment strategies.
““Even as in-house capabilities expand, many family offices still lack the expertise to pursue deals and opportunities which offer higher returns inaccessible in public markets, such as private equity, real estate and credit.””
However, building internal operational capacities to match these new ambitions presents obvious challenges.
Ladjadj of the EFOA notes that family offices are looking for “end-to-end capability”. This includes management, governance and risk control of the portfolio in addition to asset allocation, manager selection, research and reporting.
Here again, OCIOs seem to be the solution.
But another, perhaps more important reason behind the enthusiasm for externalisation is access. In particular, the ability to access private market deals and institutional-grade strategies.
As the DIFC puts it: “Even as in-house capabilities expand, many family offices still lack the expertise to pursue deals and opportunities which offer higher returns inaccessible in public markets, such as private equity, real estate and credit.”
So despite having professional, experienced financial teams, family offices will often struggle to match the networking and deal-making capacities of OCIOs, according to Tandon of Lighthouse Canton.
“The idea is to have an external team who is operating in an endowment type of strategy, institutional type of thinking. Sourcing is the most important part of that,” Ladjadj of the EFOA says.
He adds that, with a growing number of investment funds available, OCIOs are then able to help “decide the metrics that are used to be able to select fund managers” as well as when to deploy capital to a transaction.
Despite the benefits of using an OCIO, there are nonetheless a few downside risks.
For wealthy families globally, privacy is paramount. This is perhaps even more the case for families in the GCC region. And, while OCIOs have stringent internal rules to maintain confidentiality, the possibility of information flowing across boundaries can still be a concern.
Additionally, the DIFC also warns that, historically, many OCIOs have operated with “a degree of opacity”, noting that industry standards are still under development.
A final consideration for family offices is identifying that critical moment to transition from an OCIO to an internal investment team.
Simply stated, the longer you use an OCIO, the later you are in the race to build your own capabilities.
While the use of OCIOs in the Gulf appears to be gaining traction, GCC family offices are still trailing behind their international peers in terms of outsourcing.
The BNY Wealth report notes that, in 2025, less than 10 per cent of families in the Gulf region were outsourcing their investment leadership. That compares to a majority of 61 per cent of family offices globally.