January Headlines
Industry Trends and Issues
Investment Planning
Integrated Planning
Managing Risk and Liability Exposure
International Trends
Business Owner Issues
Family Continuity & Governance
Family Office Practice Management
Technology Trends
Family Education
Family Office Exchange
Industry Trends & Issues
The Global Economy In 2007—Growth, Stasis or Crisis?
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 37 million 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 article:"Global Economic Outlook 2007"
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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 sensitivities 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
Ranking Funds by Alpha
The Alpha League Tables, produced by EDHEC and EuroPerformance, seek to rank asset management companies through a measure of risk-adjusted performance (alpha), while taking into account extreme risk and persistence of outperformance. Following earlier studies in France, Italy, Spain and Switzerland, it recently produced its league table of active asset managers in the UK. Includes a discussion of, and interviews with, the top managers.
Parametric Portfolio looks at the case for fundamental indexes, whereby portfolios are weighted not according to market capitalization, but with reference to backward-looking fundamental factors. The aim is to try to avoid over-valuations sometimes embedded in stock prices (for example, during the recent technology bubble). The author argues that, while based on an index, such an approach is in fact active rather than passive, as the aim is to outperform market cap indexes. Written from a US perspective, but of general interest to investors.
The Lure of Gold
Gold. There are approximately 155,000 tons of mined gold in existence, corresponding to over $2 trillion 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.
Questioning The Appeal of Emerging Markets
In recent years, the notion of upside investment potential of the BRICs (Brazil, Russia, India, China) has become an orthodoxy in the investment world. A colourful piece by William Bernstein of Efficient Frontier seeks to debunk the myth. His argument rests on evidence suggesting at times a negative correlation between economic growth and equity returns. At best, argues Bernstein, the asset class is one of the finest diversification plays around, and, occasionally, "it gets really cheap".
Integrated Planning
Divorcing With Dignity
High profile divorces often seem to suggest that acrimony is an inevitable part of achieving a divorce settlement. A paper by the family law team at Manches seeks to highlight ways that couples can divorce with dignity. Written with reference to the UK legal system, but with lessons of generic interest. Includes a discussion of "collaborative law", based on pledges by the parties involved not to litigate the issues in court, offering speed and flexibility in the process.
Guide to Financial Planning
Bloomsbury has produced a comprehensive guide to financial planning, describing four steps to financial freedom: strategic planning; planning and pensions; investment fundamentals; and getting value for money. An interesting practical guide for wealthy individuals.
- Click here to read "Effective Personal Financial Planning"
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Managing Risk and Liability Exposure
Two Journals Focus on Risk, Efficiency
The latest issue of KPMG's "frontiers in finance" examines a range of issues confronting the international financial services industry, including wealth management, with an emphasis on efficiency and cost management, risk and capital management, and governance and reporting. Notable articles include continuity planning in the event of a terrorist attack; achieving desired benefits from IT projects; and a primer on the implications of MiFID. Also includes an examination of the relative consolidation prospects of private banking vs. insurance.
- Click here to read “Frontiers in Finance for Decision Makers in Financial Services”
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A special risk management issue of PwC's "the journal" brings together a number of articles on risk-related topics. These include an examination of the implications of Basel II; a discussion of economic-based capital; thoughts on designing a control and risk management framework; and how to create a risk management culture across the entire business.
- Click here to read “The Journal — Tackling the Key Issues in Risk and Capital Markets”
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For a comprehensive examination of the risks that wealth owning families face and techniques for assessing and managing risks to generational wealth, see the 2006 FOX Thought Leaders Compendium, "Recasting the Central Role of the Family Office as Risk Manager," available on the FOX website at:
- Click here to read “Recasting the Central Role of the Family Office as Risk Manager”
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International Trends
What's Ahead For The Global Economy?
Two world bodies offer their perspectives on the economic prospects for 2007:
- 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.
- Click here to read "Smooth Rebalancing?"
- The World Bank's Global Economic Prospects report for 2006 offers a bullish view on prospects for the world economy over the next two years — subject to certain downside risks, including the possibility of a future oil price shock.
- Click here to read a Summary Booklet of Global Economic Prospects
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Asian Financial Centres: Hong Kong vs. Shanghai
Not long ago, the economic obituaries were being written about Hong Kong, in light of its reversion to mainland China and the predicted rise of Shanghai as the financial centre for Asia. Yet, according to a report by Knowledge@Wharton, "reports of Hong Kong's death were greatly exaggerated". The paper goes on to describe how Hong Kong has emerged as the financial intermediary for investment flows into China, while the star of Shanghai has waned. According to the authors, while Hong Kong was crafting a strategy to position itself as the legal and financial centre for China, Shanghai was weighed down by corruption and a largely state-run financial services sector.
- Click here to read “Out of Shanghai's Shadow: Why Hong Kong Is Becoming China's New Financial Services Center”
Note: may require (quick and free) registration
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Business Owner Issues
Taking A Business Overseas
Whether tapping into new markets, the attractions of lower labour costs, or outsourcing the finance function, setting up an international operation is a major step for any business owner. A briefing paper by Smith & Williamson takes a look at some of the pertinent issues. Includes case studies and interviews from businesses that have taken the plunge.
Do's and Don'ts For Entrepreneurs
Everyone claims to be an entrepreneur these days, according to Knowledge@Wharton, but as the term has come into ever wider use, its meaning has gradually eroded. What does it mean to be an entrepreneur? Knowledge@Wharton reports the views of a number of business owners, who discuss their backgrounds and business philosophies, and share advice.
- Click here to read “Do's And Don'ts For Entrepreneurs, From Those Who Have Actually Done it”
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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.
Family Continuity & Governance
Family Wealth
According to the Calibre Papers, great family wealth often comes with a paradox: the attributes and risks that can generate great wealth can also quickly dissipate it. Success in a business arena does not necessarily translate into success in managing investments. The paper examines ways to lessen six of the greatest risks to preserving and enjoying multi-generational wealth — concentrating assets; overspending; overusing leverage; poor tax planning; not attending to liabilities; and ignoring family governance. It also recommends an emphasis on family communication and collaboration.
- Click here to read "The Paradox of Family Wealth"
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Family Office Practice Management
Best Practice in Hedge Fund Management
Despite an often flamboyant reputation, best practices do matter to hedge funds and are being implemented by fund managers across a broad array of investment and operational realms. These findings emerge from a recent survey of alternative investment professionals by Horizon Cash Management. A paper published recently in the AIMA Journal describes the background and findings.
- Click here to read "Alternative Investment Community Embraces Sound Practices"
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Technology Trends
Information Security Learning Points
What can be learnt from large corporations on mitigating risks by strengthening information security? The Ernst & Young 2006 Information Security Survey highlights some key issues. Includes a description of five global priorities for information security: integrating it within the organisation; extending the impact of compliance; managing the risks of third party relationships; focusing on privacy and personal data protection; and designing and building information security.
- Click here to read "Achieving Success in a Globalized World — Is Your Way Secure?"
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