New ultra high net worth research finds alternatives increasingly popular


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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

By Beverly Chandler,

Research from family office Stonehage Fleming, reveals that ultra high net worth investors are increasingly using alternatives in a quest for capital growth.

The study, entitled ‘Four Pillars of Capital for the Twenty First Century’, is based on consultation with 78 families and advisers representing wealth of GBP120 billion.

Ian Marsh, Partner (Investment Management), Stonehage Fleming, says of the survey: “One family said ‘it’s important that families have the human capital and entrepreneurial skills to withstand the choices they make’. Many believe that great wealth can only be preserved across generations if it benefits not just those who are inheriting, but society and the community too. And this is a view held even more strongly by the next generation, suggesting that as they take over the reins, this will be applied more visibly.

“One significant change from our last report in 2013 is how the families, having weathered the financial crisis, are now more focused on growing their wealth rather than just on preserving it. As families grow and the number of people these assets need to provide for increases, UHNW families are becoming more entrepreneurial and are increasingly willing to shoulder a greater degree of risk in order to access this elusive growth. In addition to the principal assets of their family businesses, families are turning to alternatives, notably real estate, agricultural land and private equity, as well as publically listed equities. Direct investments, potentially alongside other UHNWs, were also cited as having appeal, suggesting that family offices will compete in the space in the domain of sovereign wealth funds and institutions.”

The research found that family business assets are the central focus but amongst financial assets, real estate remains the asset class of choice followed by equities and private equity. Some 78 per cent of respondents said they would choose to hold real estate and agricultural land and 67 per cent said they would hold equities as part of a long term strategy.

The most favoured asset class in 2013, emerging market equities, have fallen from grace over the intervening years, while 72 per cent of main respondents listed capital preservation in their top three concerns, with capital appreciation (57 per cent) featuring as the joint second most frequently listed concern.

The survey found that the next generation was far more bullish on alternatives and hedge funds, with 43 per cent choosing to hold them, compared to 26 per cent of their parents. Anxiety about not having enough income varied significantly, with 57 per cent of the next generation citing it as a concern, compared to just 34 per cent of the current heads of families.

The next top issue for the next generation, was anxiety over income, with over 50 per cent citing this in their top three concerns against only 21 per cent of core respondents.

Family disputes and breakup were seen as the principal risks to long term wealth and higher taxes were acceptable provided tax rates were not a disincentive to wealth creation.  The survey found strong evidence of the importance of social capital with 82 per cent suggesting a link between preserving wealth and benefiting society and that 100 per cent of respondents were involved with philanthropy.

In the philanthropy department, private foundations and direct giving were the most common forms of giving, with 67 per cent and 53 per cent respectively stating these were methods of demonstrating their philanthropy.

Some 39 per cent of respondents are likely to use impact investing and micro financing as methods of giving and 45 per cent of next generation respondents said they were equally as likely to look at microfinancing as at private foundations.

Marsh says: “Family businesses were a unifying theme across all four pillars of capital and their importance both to the individual family, as well as the wider community and national economy cannot be understated. They have been, and are likely to remain, a very significant part of the engine of growth for the real economy and in the UK alone there are three million family businesses, employing nine million people and contributing 25 per cent of total GDP.

“What struck us however was how important Cultural Capital was to our respondents – a heartening response given that a lack of common mind-set or shared values bridging the generations are the most common reasons for UHNW families to ‘fail’. 41 per cent had, within their family, agreed a purpose for the family’s wealth, and many of those who had not done so felt that defining such a purpose would be a useful exercise.”

Marsh concludes: “To achieve their goals, it is important that UHNWs impose a disciplined, strategic investment approach to investing for the long term if they are to have a wealth strategy for intergenerational success. Our experience of managing family wealth is that those UHNWs who only focus on Financial Capital, and do not develop a holistic long-term strategy that encompasses the other pillars of capital, will struggle to break free from the mould of ‘clogs-to-clogs in three generations’. An understanding of their Intellectual, Social and Cultural Capital, and planning for its transfer to the next generation, is key to a family’s intergenerational success.”


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