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Family Office Elite Magazine, the wealthiest audience in the world. Family Office Elite Magazine is a very high class bespoke publication and a porthole to the ultra-wealthy family offices and UHNWI sectors. The magazine includes editorials from recent events and experts from the ultra-wealthy Family Office community.
Family Office Elite Magazine, the wealthiest audience in the world.
Family Office Elite Magazine is a very high class bespoke publication and a porthole to the ultra-wealthy family offices and UHNWI sectors. The magazine includes editorials from recent events and experts from the ultra-wealthy Family Office community.
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purpose and objectives, some key<br />
questions needs to be addressed,<br />
such as what is the meaning of the<br />
family wealth and why does the<br />
family business exist. Ultimately<br />
the family mission statement<br />
should help to align family core<br />
values and ideals, and to facilitate<br />
leadership. These core values<br />
should be regularly reviewed and<br />
periodically re-confirmed.<br />
In formulating an investment<br />
strategy, the first step is to establish<br />
an investment committee. This<br />
involves selecting experienced<br />
investment professionals, both<br />
generalists with broad experience<br />
as well as specialists in key areas,<br />
and a strong well-respected<br />
Chairperson.<br />
The investment committee should<br />
have no conflicts of interest. Its<br />
aims should be to formalize the<br />
investment process, enhance<br />
portfolio strategies, educate<br />
family members, provide a<br />
forum for discussion for internal<br />
professionals, and to formalize the<br />
review process. Its responsibilities<br />
include agreeing procedures and a<br />
decision-making process, writing<br />
an investment policy, monitoring<br />
strategic allocation and asset<br />
classes, actively reviewing the<br />
performance of managers, and<br />
investigating new investment<br />
alternatives.<br />
Of the above, the investment<br />
process and investment policy<br />
are critical, and areas where<br />
the private bank partner can be<br />
actively involved.<br />
The investment process should be<br />
rigorous and consistently applied,<br />
in order to achieve strong longterm<br />
returns. The private bank<br />
partner can assist in all areas of<br />
the process:<br />
1. Investment policy statement -<br />
defining objectives, benchmarks,<br />
roles and responsibilities.<br />
2. Asset allocation - considering<br />
potential risks and potential<br />
rewards across all asset classes<br />
and regions, also taking into<br />
account liquidity and behavioural<br />
biases of the family.<br />
3. Portfolio construction - using<br />
the bank’s research and analytics<br />
capability, establishing minimum<br />
and maximum exposures by<br />
asset class and region, as well as<br />
rebalancing rules. Performance<br />
reporting - regular in-depth<br />
reporting of performance against<br />
benchmark and objectives.<br />
If the family office does not need<br />
to outsource all of these elements<br />
of the investment process, then<br />
the private bank could undertake<br />
a competency risk analysis to<br />
help identify specific areas of<br />
weakness within the family office<br />
resourcing. With the portfolio<br />
construction, in the critical areas<br />
of fund and security selection, the<br />
best partners for family offices<br />
are those private banks with<br />
open architecture. In practise this<br />
means having agnostic product<br />
selection with objective selection<br />
based on independent investment<br />
and operational due diligence,<br />
pricing transparency with only one<br />
level of fees and no retrocessions<br />
on discretionary or advisory<br />
mandates, the right incentives with<br />
selections based on performance<br />
and no additional incentives for<br />
the salesforce to sell in-house<br />
products, and independent advice<br />
(ie. private banks that do not own<br />
a hedge fund manager, do not run<br />
a private equity business, and<br />
do not own a fund management<br />
company). In addition, private<br />
banks that can offer the family<br />
office access to their institutional<br />
trading platforms should be<br />
preferred. In particular, access<br />
to a capital markets platform<br />
can offer speedy and efficiently<br />
priced execution with smooth<br />
settlement. Some larger private<br />
banks are also able to offer access<br />
to their institutional teams, so<br />
enabling family offices to create<br />
uniquely structured hybrids and<br />
customized structured products<br />
based on objective risk profiling<br />
and desired outcomes.<br />
The investment policy can be<br />
framed by the private bank,<br />
and needs to consider firstly<br />
the investment objectives, for<br />
example, how much loss is<br />
acceptable? What is the financial<br />
goal? What is the potential<br />
annual cost of achieving that<br />
goal? Secondly, the investment<br />
philosophy should be considered,<br />
for example, does the family feel<br />
strongly in favour of an aggressive<br />
trading approach? How much<br />
diversification is wanted? How<br />
many core positions are preferred<br />
versus non-core positions? Thirdly,<br />
specific investment selection<br />
criteria for funds, stocks and<br />
bonds should be decided. Finally,<br />
monitoring procedures need to be<br />
established.<br />
These include assessments of how<br />
to monitor, how often to monitor,<br />
and how to assess if the portfolio<br />
guidelines are being met. Private<br />
banks can have significant roles to<br />
play in helping to develop the right<br />
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