A panel of sophisticated family office leaders shared their differentiated approaches to investing private capital in uncertain markets. These family offices are pursuing unconventional approaches with conviction. They shared actionable takeaways with other family offices facing similar challenges.
- Regarding managers and strategies, if you don’t say no 95% of the time, you are doing something wrong. Think about how to create a default process of saying no, and then invest only in those managers or strategies that are truly exceptional.
- If you do this right, you are often looking in places that are contrary to the norm. It’s important to help families understand why they want to invest—what is the purpose of the investment?
- To be a long-term investor you need to be prepared to go through the full cycle, which means you will participate in a downside at least 50% of the time. It’s important to lower the correlation to economic conditions.
- We’re close to a tipping point in a very divergent world. Think about protecting capital and consider what are likely to be the main destroyers of wealth.
- Liquidity in the market is something of great worry. The coupling of central banks and public markets is concerning. The economy is very politically driven and investors need enough liquidity to sustain a correction.
- The China trade war is concerning because there will be significant winners/losers. There are a lot of volatile aspects that need to be handled delicately and the State Department is not providing the stabilizing role it needs to. China is an emerging superpower taking on an established superpower—a situation that can lead to significant risks.
- Tech is a very exciting area and there are amazing things happening with artificial intelligence, robotics, 3D printing, etc. Find areas you like and understand where the industry is likely to be disrupted.
- Allocate capital to strategies that create stable capital, but avoid the subtle mistake of overdiversification.