Talk about a rough week at the office.

Over the past week, Wall Street has been picking through the implosion of a $10B fund called Archegos Capital Management.

A number of highly leveraged bets went sideways and the fund — run by industry vet Bill Hwang — went poof virtually overnight.

Per The Wall Street Journal, Hwang is purported to have personally lost $8B in 10 days while 2 global lenders (Credit Suisse, Nomura) are also reporting 10-figure losses.

While these numbers are big…

… the longer-term effects may send ripples through a much larger pile of money: The family office industry.

Family offices are privately held companies that manage assets for the superrich ($100m+ in investable assets) with the goal of preserving wealth over generations. The source of the funds can be from generational wealth or uber-successful entrepreneurs.

Per the Financial Times (FT), the industry’s numbers are staggering:

• 7k+ family offices globally (up ~40% between 2017 and 2019)
• ~$6T in assets under management across all the offices (nearly 2x the hedge fund industry)
• $1.6B is the average family office holding

Here’s the kicker: the industry is very lightly regulated

While hedge funds, endowments, and pensions are accountable to outside money, family offices are able to stay a secretive affair.

Dan Berkovitz — a commissioner of the Commodity Futures Trading Commission (CFTC) — believes the current disclosure requirements are totally insufficient as reported by FT.

“The information required would fit on a Post-it note,” he said in a statement regarding Archegos. “And… the annual cost of the filing [is] merely $28.50.”

What will happen next?

While many family offices employ boring financial strategies to preserve wealth, Archegos — which had a peak portfolio value of $100B+ boosted by bank leverage — shows the risk.

Even though Hwang admitted to securities fraud in 2012 (and paid a $44m fine), leading investment banks were happy to have his business.

In the aftermath of the real estate crisis, the 2010 Dodd-Frank Act tightened financial regulation. Post-Archegos, the industry may see new rules for family offices, banking services, and the specific financial product used in Hwang’s trades (called total return swaps).

All of this seems totally reasonable…

Israeli-founded digital advertising firm Adcore (ADCO) began trading on the TSX Venture exchange less than a year before the COVID pandemic lockdowns began in early 2020. While that uncertainty created short term challenges in the market and with their business plan, the company has roared back with results that are thrilling both early and new investors.

Adcore was first introduced to our audience by Ryan Irvine and the team at Keystone Financial as one of their researched recommendations. CEO Omri Brill subsequently presented as part of the 2021 World Outlook Financial Conference Small Cap Investing series (CLICK HERE to watch).

The company just released it’s 4th quarter and full 2020 financials yesterday, and the revenue growth is nothing short of spectacular, up 219% for Q4 to $13.3 million and up 52% to $22.8 million for the full year. Adcore is one of those companies that has benefited from the shift to a stay-at-home economy. Their digital advertising technologies have become essential to clients around the world who now rely almost entirely on e-commerce revenue.

“We rebounded from a challenging first half of 2020 to an astonishing all-time high in revenues,” explained CEO Brill. “And we see the shift in consumer behavior and the effectiveness of digital advertising continuing in 2021.”

It also helps that Adcore stayed true to it’s aggressive strategic initiatives. In the past year the company announced new and expanded relationships with industry behemoths Shopify, Facebook and Microsoft. 2020 saw the opening of offices in Hong Kong, adding to the Tel Aviv, Melbourne and Toronto locations. A second China office was opened in Shanghai in early 2021. The company also graduated to the TSX main board and added a Frankfurt listing as well. A dual US listing is in the works for 2021. And with plenty of cash in the bank Adcore has the ability to continue it’s international expansion.

Adcore’s main challenge, as with many fast growing tech companies, is to ensure it’s bottom line performance keeps pace. EBITDA remains positive but did not move up relative to revenue. Investors are willing to be patient with such positive and bullish growth, but new all-time highs bring new and higher expectations.

According to Omri Brill, “this is a pivotal time as global businesses accelerate their digital transformation. We stand ready to help them increase their presence, brand recognition and success in the digital marketplace.”