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The Future of Family Offices and new trends in wealth management for the post-crisis world

|Includes: SPDR Gold Trust ETF (GLD), SLV

Great conferences are a rare find. Specially the ones where you get to meet a number of Swiss, German and Russian hedge fund managers and wealth advisors from all over the world. And there is one I want my readers to know about. Early this summer, before I ventured on a 3-month long tour of Europe, I attended the European Family Office and Private Wealth Management Forum. The forum was organized by Opal Financial Group. It’s a highly informative, 2-day meeting, with extensive topic selection, great networking opportunities and delicious food arrangement. What attracted the 500+ professionals in the audience was the topic of family offices, wealthy families, and alternative asset money managers. Topic selection focused on ways to mitigate risk , find new uncorrelated assets, alpha-type money managers and regulatory issues pertaining to the tax and daily business at family offices worldwide. The list of speakers spanned from established family office presidents to life market statisticians, hedge fund managers, green energy executives, academics and the largest fund product firms (including a representative from John Paulson’s fund).  Following are the top-5 trends for family offices and financial products that I enjoyed the most:

Life Markets: The most interesting new topic on this forum revolved around finding non-correlated asset classes. Arthur Bowen, Director at Tranen Capital described a relatively new way of arbitraging in the insurance markets. His fund and firm utilizes the various benefits of Life Insurance products. Tranen Capital operates a diversified strategy by managing variables of value, contestability and projected maturities, carrying the strategy forward by selecting from two options of the realization of profits, being a classic buy and hold strategy. Be sure to watch developments in this space as it will become a breeding ground for many new financial innovations.

Tactical philanthropy:
  the topics ranged from micro-financing to charitable Trusts, foundations and philanthropy investments, all around the goal of converting passion into mission. Ludwig Forrest from Kind Baudouin Foundation and Civenta-Andres Zaragoza, CEO of the Pentium Fund Group gave tear-breaking speeches about how everyone can help to make this world a better place, and yet run money on the side for good causes. One of the most emotional meetings ever, it truly about changing lives; one life after another.

Global Credit Markets: Moderated by Dino Sola from Monaco Investment Research this panel covered forecasting default and recovery rates in bonds, managing credit risk and the differences between structured and bond products. Amongst the most interesting conversations, Jean Marc Michelet, Director of Michelet Consult criticized US rating agencies as the main causes for the credit crisis.

Benefits of adding or avoiding gold and other precious metals: Certainly a topic that attracted a lot of interest, it was interesting to learn that the bid-ask spread of parking money in real gold cash is larger than 3%. Certainly, gold ETFs were discussed and J. Braldy Hall, CEO of GOLDX talked about a new EBAY-style online market he is designing to make it easier for individuals to transact in gold, regardless of the products they use. The topic also covered what vehicles are available and are best in terms of taxes for family offices, wealthy individuals and their advisors. Topics and ETFs like GLD, and SLV were discussed as well.

Exploring Ucits: The trend towards packaging hedge fund strategies as Ucits was discussed by Gerlad Toledo from Deutsche Bank and Dr. Drago Indjic (Hedge Fund Centre) who moderated the discussion. The Undertakings for Collective Investment in Transferable Securities (pronounced "yoo-sits") are a set of European Union Directives, sort of what mutual funds are) with objective to allow for open-ended funds investing in securities to be subject to the same regulation in every EU member state. The topic is important because a large wave of hedge fund Ucits is gathering momentum. However, the audience feared that structuring hedge fund strategies as Ucits will distort strategies and diminish returns. A number of Family Offices expressed opinion that institutional investors should have access to alternative strategies without the need for the expensive Ucits framework. However, UCITS are operationally very demanding and cannot accommodate all strategies, which will lead to many US managers to not offer their strategies in UCITs format in EU.

Safeguarding your family assets: Petro Marchettini from Adelaide Consulting and Hans-Willern van Tuyll touched on important topic such as family governance and protecting families with new probing technologies for investment managers, all that while managing social exposure. Insurance options for families were also discussed.

Rob Ivanoff
President, Financial Products Research (FPR)
Boston, MA



Disclosure: No positions in stocks mentioned