Following global losses in most asset classes and notorious failures of due diligence, single family offices are retrenching their strategies and looking to the short term.
Following global losses in most asset classes and notorious failures of due diligence, single family offices are retrenching their strategies and looking to the short term, a new report shows.
‘Conserving Family Wealth’, produced by Merrill Lynch and Campden Research, found that an average portfolio in 2008 had switched to much safer, shorter-term holdings compared with 2007. Cash went from five per cent in 2007 to 26 per cent in 2008, reflecting its immediate attraction as a safe haven, while the proportion of equities nearly halved, from 34 per cent to 18 per cent. The proportion of hedge funds and private equity funds also diminished significantly.
Prompting these changes, the priorities of the families were dramatically different: over half of the families wanted to preserve or preserve very conservatively their wealth in 2008, compared with just over a quarter in 2007. ‘Preserve very conservatively’ increased by four hundred per cent to 20 per cent.
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The study, conducted in autumn 2008 across 40 single family offices, reflected a surprising complacency in single family offices, 74 per cent of whom said that they had not changed the way they handled risk, despite the financial crisis and recession. Gary Dugan, managing director of Global Wealth Management for Merrill Lynch, said that he thought that if the study had been carried out more recently, it would have show less complacency.
Predictions of the composition of an average portfolio in three years’ time were very conservative. Equities would make up 34 per cent (now 18 per cent) and cash 13 per cent (now 26 per cent), with property, fixed income and commodities remaining at a similar level. This is a return to previous years’ levels, implying that family offices think the economic scene will return to its past composition.
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