Whoever thought sustainability would be such an issue for single family offices? Forget capital growth or expansion of services. Many family offices this year are just trying to survive.
At a press conference last month to release Campden's Single Family Office research, I was talking to Mark Nixon, who heads up Merrill Lynch's Family Office Group. By his estimates, if your family office hasn't lost at least a third of the value of your assets, then you're one of the lucky ones. Indeed.
Last year, when we asked SFOs how much the credit crunch and resulting economic turmoil had affected their portfolios, the resounding response was that investments were brutally hit almost across the board. But when we asked them about their risk management strategies, many said they hadn't changed a thing yet. A worrying thought, to say the least.
Now, it seems, many are purporting to be re-assessing their procedures but is it too harsh to think that this might be akin to shutting the gate when the horse has bolted?
I've already heard rumours that recriminations have already started in certain families who feel they have been let down by the very people in which they have placed so much trust. In this, the third issue of Campden FO, we spend a lot of time questioning the very value of having your own family office.
In our cover story this Spring, investment writer James Moore talks to a variety of practitioners – from SFOs, MFOs, private banks and investment family members – to gauge the mood of family offices and asses their outlook for the future. In his investigations, James has unearthed some interesting facts and examples of how SFOs are justifying themselves to their families, whilst planning for every possible outcome (including potential mergers with other SFOs).
And we go into greater depth into what is on the minds of family offices in our eight page report on European single family offices. This ground-breaking research is a detailed analysis of the single family office's evolution to meet the needs of today's business world. Amidst the backdrop of one of the most important years in recent financial history, this research is a vital read for any family office or service provider to family offices.
We talked to 40 single family offices, big and small, from all over Europe. The story they tell is a gripping tale amidst market upheaval. Of extreme interest is the massive shifts in asset allocation that many SFO portfolios have been subjected to – either intentionally as a safeguard or through market turmoil.
The flight to cash from other less stable asset classes has been without exception amongst SFOs. But of greatest concern to many have been the amount of funds locked up with hedge funds with long redemption periods attached. With this in mind, this issue we explore two key issues in our Class section.
Firstly, just what are the asset classes in which funds can now be sensibly invested? Cash has its place in a portfolio but it can't be the majority share, certainly in the long term. How can family offices explain their raison d'etre if all they are doing is sitting on large piles of inactive cash?
But how safe is gold and other commodities? What of government and corporate bonds?
And for those locked in hedge funds with long redemption periods, we also discover what exactly can be done to get out. From secondary market auctions to custodial strategies, we help you build a plan for unlocking liquidity trapped by pesky hedgies.
I hope you enjoy this issue of Campden FO and wish you all the best for the rest of the year and beyond.