Asset Abu Dhabi - Family Offices: The Next Generation

foreign [Music] it's uh great to be back in Abu Dhabi thank your excellencies for for for having us uh this is a great event and an amazing uh setting I'm joined here with my colleague uh Paul homsy who's in the audience and he'll be available for questions later on um just move this on so what Forbes Family Trust is is it's a multi-family office we're based in New York but we also have offices in Geneva Palm Beach London Paris Boston Philadelphia and um what we do what we are is we're a member of the Stanhope Capital Group which oversees about 30 billion dollars on behalf of significant families institutions charities and endowments around the world we aim to provide clients with the best available investment expertise in an environment where the interests of all parties are properly aligned also known as no conflicts we value our relationships and offer highly bespoke Services seeking to address client specific objectives constraints and risk tolerance our group represents over 250 families globally and 50 institutions like foundations and endowments and we're one of the largest independent Global wealth management businesses in the world so what do we provide and how do we do it Global families often need an investment Solutions partner in three ways one serving institutions and single-family offices as an outsourced investment advisor so often what we have is we have a well-built out multi-family offices or single-family offices that want to leverage our investment team and our resources and the infrastructure that we built so we work with single-family offices doing that second we also conduct investment research investment selection due diligence and portfolio management and then thirdly we're often hired by large family offices to manage special investment mandates on behalf of families working with other service providers and and most importantly working with large single-family offices that have their own investment team so what's our investment philosophy I would say now more than ever we think these three philosophies are the most important thing to follow from a disciplined perspective and given where markets are now it's it's more important than ever to stay focused and true to your strategy the first we believe it's important to invest in is equities multistrat Equity long short event distressed credit and global trading second follow three rules to mitigate loss loss mitigation is the name of the game price matters spend wisely and diversify effectively which I think you'll see as a theme throughout and then third maintain investment discipline maintain the strength of your convictions meaning don't give in to fear now more than ever is an easy time to do that applied data and rigorous analysis to chart the course be willing to adjust course and exploit illiquidity what I mean by exploit illiquidity is the families we work with have tremendous liquidity almost at any given time for those families that have cash right now it's never been a better time to be working systematically and disciplined in investing your program We Believe key considerations for an investment success are the following primary focus on risk management as I mentioned controlling risks through uncorrelated asset classes and managers in other words when one asset class goes down the other asset class goes up this has been crucial for our families during this period of dislocation select Investments also after all only considering risk liquidity tax complexity and consequences and net of fees fund those Investments as a higher probability of the desired outcome and balance both a long-term perspective with the ability to capitalize on near-term risk and opportunity given Mark and Dynamics again super wealthy families globally have an unprecedented opportunity to invest when others can invest um so we look at this dislocation as a tremendous opportunity to create future generations of wealth we think the Implement implementation process and portfolio construction process is not always focused on in a systematic way we help families do this first we start with a strategic asset allocation strategic asset allocation is basically what is the family's long-term goal with the portfolio how many generations does the portfolio need to support and what a liquidity needs of the family do they live off their portfolio do they have an operating business that feeds cash into the portfolio and what do they want to get out of it that we call an investment policy statement that's sort of the the Bible so to speak of what the family should follow from an investment program then we look at tactical asset allocation which I would say is is quite important right now tactical out asset allocation is how do we deviate from our strategic asset allocation our our our overall governing for the portfolio how do we deviate from that to make moves in the short term to capitalize on market dislocations and so that is is hugely important in being able to have the flexibility to invest in different asset classes or dial up or dial down the risk in a particular asset class and then obviously third is how do you populate the portfolio what's your manager selection and vehicle selection and that's something that we get hired to do because our diligence process and our knowledge of managers both existing well-established and rising stars is critical we look at a global family office as having six pillars the first is asset allocation and portfolio construction which includes risk profile sorry I'm not moving these slides along I'm just going hold on a risk profile goal determination manager selection and then construction and rebalancing the rebalancing gets into what I mentioned before which is the Tactical allocation financial planning obviously involving cash flow needs scenario planning Estate Planning and succession planning which I think is a huge theme right now in the region including Trust Services optimization of localization wealth transfer strategic insurance which could play into life insurance and efficient structures just how should these families set up their investment vehicles where should they be onshore or offshore I mean it's very complex which is sort of what we like the third is Estate Planning and succession planning I'm sorry I did that already the fourth tax planning this involves minimization strategies and and turnover control fifth is philanth philanthropic advisory which is just exploding more and more every year so what we help families do is foundation creation and management how do they get set up how do they come up with their mission statement Foundation infrastructure what does it look like is it does it have 50 people does it have three people does it leverage off another um philanthropic organization like the Gates Foundation where you make a pledge and you just give your money to The Gates Foundation because they're set up properly or do you create your own and then Grant making advice we think that you know when people first start large foundations they're not really sure how to decide who the money goes to everybody's knocking on their door and it's overwhelming so we help them create sort of a systematic way to evaluate um people were you know asking for Grants and what they're for and then six is just other family office services which includes reporting which is a huge thing for people pulling all of the information together in one place and being able to deliver it to the principals um in a very cohesive clear way without having their assets sort of scattered all around art advisory aircraft Services residential advisory family education and then Insurance these are things that we see single-family offices need to make sure they have in-house or they have the right people outside helping them with it this slide is interesting and it's and I think it dovetails uh with a theme that Dr Nasser Saidi touched upon and sort of what are we doing in this region what's happening here and why and it's interesting we've we've partnered with uh a handful of very wealthy well-known families in the region to help them create family offices we've we're working with them basically to establish or enhance and organize the proper framework to build the family office to create a truly institutionalized family office for today and future Generations what we're seeing in the region is that these very wealthy families really want to um build the model that we've seen in the U.S which is a truly institutionalized family office and that involves hiring a lot of investment professionals it involves hiring firms like ours to help assist in doing that and what we found is there's a real need in the region um to bring a firm like ours in to actually help them set this up most families have an infrastructure but a lot of it has to do with their operating business and they've just leveraged off their operating business to satisfy the family so there's definitely here that's moving towards building institutionalized family offices and I think it also dovetails with the foundation requirements that we're seeing second is we work with families here to come up with an investment policy statement um which is you know a detailed comprehensive investment policy statement for the portfolios this IPS as we call it sets forth different weightings to each specific asset class we call them like bands or guard rails allowing the investment manager or family office professionals to tactically be overweight or underweight in any specific asset class as well as allow Market moves which could inadvertently result in a violation of the IPS by pushing the asset class over or underweight so what does that mean in English basically what that means is we've found that there are family offices that have in-house investment professionals investing the portfolio but not with not a clear set of rules set by the family and so what happens is they're trying to invest in things and they have to go and talk to one of the principals the principal doesn't get back to them they they miss the opportunity I can give you numerous examples of that what this does is it's sort of like a contract between the family and the investment professionals and it says here's how we're investing these assets here's how we're allowed to change how we invest and here are the guard rails that you've approved to allow us to move between asset classes and dial risk up or down within certain parameters after we established the investment policy statement we assist in constructing the asset allocation and implementation through manager selection to achieve the goals set forth in the IPS including risk return required by the family office after that what we do is once we help them build the machine we help them monitor it and so what we do is we engage in quarterly and annual reviews with the family to make sure the Tactical moves that were made during the year correspond to the rules that the family set forth with the family office investment professionals and so we build that out for them and we help monitor it we also have been asked to participate recently for large family offices in the family's investment committee which has been interesting because what we've done is we've we've been able to sort of review everything we just went over and make sure that it's being followed by the professionals at the family office so where there is a resource um and a tool what we're also noticing in the region is that there's this uh there's this movement and separation right between operating businesses and institutionalized family offices and so what a lot of families in the region we found have wanted to do is separate the two completely put a wall up and make sure that there's not a lot of crossover between the operating business and the investment professionals because when there is there tends to be distraction and it doesn't always work as well on the investment program side and the returns show it so we play an integral role in that and then we make sure that to the extent they want investments in the U.S we really help the investment team work through that and decide which asset classes should be working on how does it fit within the overall investment policy statement that we set forth and what part might we play for the family office in a specific component we're often hired here also to just validate existing structures there's a lot of great family offices in the region that are set up just like I described and so oftentimes it's important for the family office investment professionals to be able to have a validation from an institutionalized firm saying actually these guys are doing a great job here's how you set it up this is what you want them to be doing this is what they're doing and then lastly because I'm out of time is um we're helping a couple of single family offices in the region build multi-family offices which is super fascinating so we started as a single family office with the Forbes family we built ourselves into a 30 billion dollar Global multi-family office we have found that some of the institutionalized family Offices here want to do what we did and so we're helping a couple through how do you set it up how do you make sure the original family is still served properly and that the investment professionals don't get distracted because they see the money elsewhere that's been an interesting phenomenon that we've seen in the region right now so thank you [Applause]