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December Headlines
International Trends
Industry Trends and Issues
Investment Planning
Integrated Planning
Managing Risk and Liability Exposure
Business Owner Issues
Family Continuity & Governance
Investment Trends and Issues
Issues For The Private Investor in Private Equity
Strategic Philanthropy
Family Office Practice Management
Lifestyle Management
Technology Trends
Family Education
Family Office Exchange
International Trends
The Global Economy In 2007—Growth, Stasis or Crisis?
What will happen to the global economy in 2007? US FoxConnects rounds up some perspectives.
A special report by Deloitte examines the likely impact of continued long-term global imbalances—notably relating to budget deficits, interest rates and currency valuations—on the global economy. Is the world economy in for a hard landing in 2007, or are such imbalances more manageable than previously thought? The authors recommend preparing for the worst.
The latest OECD Economic Outlook predicts a soft landing for the global economy in 2007, with a rebalancing of growth across OECD regions. It foresees an unwinding of cyclical differences, with activity slowing in the US and Japan, while gathering speed in Europe. Growth among the BRIC countries is also likely to be buoyant.
Giles Keating, Head of Global Research at Credit Suisse, offers his views on the short-term prospects for the global economy, as well as thoughts on implications for investors. Featured in the Credit Suisse e-magazine, he describes a slowdown led by the US housing and auto sector, spreading to China and possibly to Europe in Q1 2007. However, Keating does not see the slowdown as pronounced, and forecasts a reacceleration by next spring.
- Click here to read “World Economic Slowdown Spreads to China”
(Note: also available on video, viewable at the same page)
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A report by Capital Economics cautions that the biggest threat to the world economy comes from the US, which it predicts will slow sharply during 2007, and get progressively weaker over the next two years. The authors cite the slowdown in the US housing market as a key factor, leading to higher savings and lower consumption. Also includes a review of prospects for the main countries / regions.
- Click here to read "Global Economic Outlook-Boom This Year, Bust In 2007?"
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Industry Trends and Issues
Global Distribution of Household Wealth and Debt
A new study on The World Distribution of Household Wealth, by a United Nations research institute, estimates that the richest 2% of adults own half of all world wealth. Some 37m adults fall into the richest 1%, with assets of more than $500,000. Described as “the most comprehensive study of personal wealth ever undertaken”, it measures net worth as total assets less debt in the year 2000. Also includes detailed analysis of wealth distribution by region, with North America, Europe and high-income Asia Pacific countries holding almost 90% of total world wealth.
- Click here to read the executive summary
- Click here to read the full report
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A special chapter in the recent OECD Economic Outlook examines whether households are more vulnerable financially as a result of a growing burden of debt. It finds that, while increases in OECD household wealth have provided a financial cushion against a negative shock, overall sensitivity to house price and interest rates shocks have increased.
- Click here to read “Has The Rise in Debt Made Households More Vulnerable?”
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Investment Planning
Open Architecture
Open architecture has strong intuitive appeal among investors, offering as it does the prospect perhaps of more objective advice. But what impact does it have on the financial services industry? A white paper by Greycourt examines its influence, and questions whether it is a “disruptive business model”—or one that catches out incumbent players, meaning they cede leadership to a new generation of firms. Concludes with suggestions to investors on how best to navigate an industry in a state of flux.
- Click here to read “Open Architecture as a Disruptive Business Model”
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Global REIT Report
Ernst & Young recently published the inaugural edition of its Global REIT Report, providing a snapshot of the performance in REITS in 13 separate countries across four regions. The Report examines parameters including market size and depth, total return, balance sheet / income measures, and volatility. It also presents its research on the tax and regulatory regimes operating in various countries where REIT markets are established
Focus on Physical Asset Classes
Considering diversifying into less traditional areas of investment during 2007? US FoxConnects rounds up some contributions on performance and prospects for a number of physical asset classes:
- Energy. A report by Hammond Associates points out investment opportunities for family offices arising from growing imbalances in the global supply and demand of conventional energy supplies. It describes institutional energy investing strategies, the main vehicles and tax benefits arising from direct energy investments.
Click here to read "Private Wealth Focus: Energy Investing For Family Offices"
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- Property. While the US residential property market is undergoing a correction, commercial property markets appear robust. A paper by Greenberg Traurig examines the underlying factors, and asks: how much longer can it continue?
Click here to read "Recent developments and trends in the US property markets: can the feeding frenzy continue?"
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- Timber. Timber was traditionally viewed as a relatively stable investment, but the last decade has been characterised by cyclical decline in timber prices, while land prices have risen substantially. A paper by Forest Resource Consultants seeks to understand why, and argues that long-term investment potential remains sound.
Click here to read "How Southern Timberland Market Trends Impact Investment Returns"
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- Gold. There are approximately 155,000 tonnes of mined gold in existence, corresponding to over $2trillion at today's prices. A detailed study by Julius Baer takes an in-depth look at gold as an investment opportunity, highlighting the attraction of its diversification and hedging characteristics.
Click here to read "The Lure of Gold"
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Integrated Planning
Estate Planning In Uncertain Times
With the Senate's refusal to consider a full estate tax repeal, and several compromise proposals for reform, there is little certainty on the future direction of estate tax. This complicates choices in estate planning, but should not be an excuse for avoiding working on your estate plan, according to Northern Trust. Regardless of the future outcome, it says in an article reviewing the topic, planning for the future remains vital.
Retirement Alert
What retirement planning action is required before the end of the year? An alert by Greenberg Traurig discusses the provisions of the Pension Protection Act of 2006 that come into force on January 1 2007, and so require immediate planning.
- Click here to read "Year-End Retirement Planning Under the Pension Protection Act of 2006"
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Canada—“Immigrant Trusts”
Canada is a vast country keen to attract wealthy, entrepreneurial families. By way of enticement, it is offering the ability to shelter assets from Canadian tax for five years by placing them in an offshore trust. A paper by Butterfield Bank describes the key issues, and should be of potential interest to any wealthy family considering relocation to Canada.
Managing Risk and Liability Exposure
Risk in the Hedge Fund Industry
In September this year, respected multi-strategy hedge fund Amaranth lost 65% of its $9.2 billion assets in little over a week. How could this happen, and what lessons can be learnt by prospective hedge fund investors? A report by Edhec argues that, while economically viable in providing liquidity to the natural gas industry, the magnitude of Amaranth's energy position-taking was inappropriate relative to its capital base. Also offers six key lessons for investors, risk managers, hedge fund managers and policy makers.
- Click here to read “Edhec Comments on the Amaranth Case: Early Lessons from the Debacle”
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Business Owner Issues
Why Corporate Strategy Goes Wrong
A paper published by Knowledge@Wharton offers insights from Michael E. Porter into corporate strategy. Porter argues that errors in strategy are often self-inflicted, arising from an attempt to compete head-on with competitors, rather than seeking to define and develop their own unique position in the market. He also describes a singular focus on shareholder value as the “Bermuda Triangle” of strategy.
- Click here to read “Michael Porter Asks, and Answers: Why do Good Managers Set Bad Strategies?”
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Business Lessons—From James Bond!
Bond.. James Bond. Or should that be Brand? A light hearted piece in Entrepreneur.com examines what lessons the business world can take from the rejuvenated tuxedo-clad secret agent franchise..
Understanding the Busines of Business Aviation
Bombardier Flexjet has written a paper designed to help the reader understand the business aviation solutions available in the marketplace today, and to identify which may be of greatest interest.
- Click here to read “Understanding the Business of Business Aviation”
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Family Continuity & Governance
Affluence and Well Being
In a time of complexity and opportunity, change is being driven by globalisation, advances in technology, and improving human health and longevity. A paper by Raylign examines how families can seek to chart a course to multi-generational well-being—encompassing not just financial aspects, but also broader notions of happiness. It calls for clarity and continuity of purpose, careful stewardship of material and intellectual capital, and effective family leadership.
- Click here to read "Affluence and the Pursuit of Multi-Generational Well-Being"
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Strategic Philanthropy
The Philanthropic Behavior of Wealthy Americans
HNWI households are responsible for some two thirds of all household charity in the US, amounting to some $126 billion. A comprehensive research study by The Bank of America, in conjunction with the Center on Philanthropy, seeks to examine the philanthropic practices and motivations of wealthy Americans. Findings are based on a survey of over 30,000 households in HNWI neighborhoods.
- Click here to read "The Bank of America High-Net Worth Philanthropy Study"
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Disaster Response
Disaster response giving by private individuals has risen dramatically over the past few decades. Yet while often seasonal and / or predictable, disasters frequently catch private philanthropists by surprise. A paper by Arabella Philanthropic Investment Advisors recommends advance planning, to enable donors to identify organisations that respond to disasters in a way that matches their existing donation interests.
- Click here to read "Investing in Disaster Response"
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Trends in International Grantmaking
A report prepared by the Foundation Center examines trends in international giving. It estimates that international giving by all US foundations reached a record $3.8 billion during 2005, with Africa, Asia and Global Programs the main beneficiaries.
- Click here to read "Confidence in Charitable Organizations, 2006"
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Family Office Practice Management
Family Office Survey Results
According to the Northern Trust 2006 survey of US family offices, more than half of family offices believe their greatest challenge is the volume of data required to compile, consolidate and produce month end financial statements. They spend an average 44 hours per month to produce a single net worth statement. A press release by Northern Trust outlines the main findings.
- Click here to read the press release
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Lifestyle Management
Seeking "Rhythms of Relationship"
Modern life is characterised by a lack of time, with resulting pressures on personal relationships. A presentation by Peter Fraenkel of The City College of the City University of New York examines the impact of time on couples. He concludes that couples need to create Rhythms of Relationship, or "regularly occurring periods of connection across days, weeks, months, years". These are, argues Fraenkel, different to schedules or routines—while the latter are linked to Industrial and Post-Industrial production, "rhythm" connotes music, the body, the seasons, and ancient traditions.
- Click here to read "Clocks, Calendars, and Couples: Time and the Rhythms of Relationships"
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Technology Trends
Technology Lessons from Community Foundations
An article published in Foundation News & Commentary explores technology trends among community foundations. The authors explore the potential of "social software" to allow communities to collaborate, and to change the ways that information and knowledge is shared. An overview of new communication technologies that may be of interest even outside the non-profit sector.
- Click here to read "Staying Ahead of the Technology Curve"
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