Making money: what the experts think
The super-rich march on
Just 4% of the world’s richest families lost money last year, “thanks to booming stock markets and money-spinning private equity deals”, said Rupert Neate in The Guardian. Indeed, the average return generated by “family offices” – which invest and manage rich people’s fortunes – came in at 7%. That compares rather favourably with “the average interest rates of just 0.35% offered by instant access high-street bank accounts”. Or, indeed, with the measly 0.3% returns generated by family offices in 2015, when stock markets “were in turmoil”. 2016 was “absolutely, no question, a marked performance” for the fortunes of the wealthy, said Dominic Samuelson of Campden Wealth, which researched the report with the Swiss bank UBS. “Irrespective of the economic challenges, great wealth is continuing to be generated across the globe.”
Private preoccupations
The study offers a fascinating insight into the current investment preoccupations of the super-rich, said Lucy White in City AM. They appear to have lost their zest for hedge funds and property – both are seeing “a gradual decline in take-up”. But equities and private equity are still all the rage: they now comprise 27% and 20% of the average family office’s investment portfolio. “The benefits of this bolder approach” were evident in this year’s strong returns, said Sara Ferrari of UBS. And, looking to the future, most family offices are still risk-on. In gung-ho style, 60% plan to maintain their investment in “developing market” equities; and 40% intend to allocate more to private equity funds or invest directly in companies themselves. Private equity is now so in vogue – and the competition for plum deals so intense – that the chief headache facing many family offices is sourcing the right investment.
A force for good?
Family offices “were pioneered by the Rockefellers in the late 19th century to preserve their wealth for future generations”, said Neate. The average office in the survey has an average $921m assets under management, and last year gave just $5.8m to philanthropic causes. Still, they may become a greater force for good, as younger generations get more involved, said White. Firms are reportedly increasing allocations to “impact investments” seen as environmentally and socially sound.