Property and private equity remain relatively specialised asset classes and we see families who understand these assets or who have in-house expertise continuing to invest.
Many of our families are putting 10%-20% of their assets aside for higher-risk deals where they feel that they can use their assets to materially affect the wealth of the family. We are seeing a few of our families enter into club private equity deals with one another especially where they have done business before and recognise their differing skill sets. Generally, however we are seeing that our families want a significant (40%-70%) proportion of their wealth in liquid assets, whether it be bank deposits or quoted securities.
It is notable that there is a growing focus on the fees that are being charged by investment managers – again linked to the lower relative returns being achieved and therefore the greater proportion that fees were taking up. Families are looking much more carefully not just at the annual management charges but at total expenses as a percentage of net assets. There are opportunities in both property and private equity if you know where to look. We are not investment managers but we do get a lot of deals across our desk – good, bad and ugly!
Overall, the sense we are getting from our clients and advisers is that the London property market prices are likely to be flat in 2015 before continuing to rise steadily. There are other property markets around the world though that still look like good value if you know those markets well and have a long enough time horizon to wait for liquidity to fully return to those more secondary markets.
A minority of our clients actively track diversification and the theoretical correlation between their different asset classes. More important to them is that they have sufficient liquidity so that they do not have to sell assets off at fire-sale prices and are able to respond quickly to opportunities as and when market prices fall.
Originally published in Family Office Global, Winter 2015.
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