wealth mangement with a broad perspective
Asset management, as offered by our parent company FTC Capital, is based on financial instruments like bonds, stocks and derivatives. With these instruments, in a world of extremely low or even negative interest rates, it is not an easy task to reconcile investment objectives with risk considerations. At FTC mainly quantitative models are used to meet this challenge. In order to further improve risk diversification, asset classes with a low dependence on stock market developments are considerable. These include private equity and debt, real estate and other tangible assets such as art, antiques or luxury watches.
The role of the Family Office
Together with the client (the decision centre of the family or family business), a profile of requirements for the wealth management is drawn up based on a detailed analysis of the current asset structure, the risk profile and future investment goals. The profile will include the future, optimised structure and the target allocation to the various asset classes and currencies. The Family Office will subsequently support the client in realising the jointly defined profile. For 360° support we can always resort to our contacts with first-class banks and asset managers and we will advise the family in selecting the best partners for the individual needs.
Government bonds with the highest credit ratings such as US Treasury Notes or German Bonds formed the robust core of conservative portfolios for decades. Since the low or zero interest rate policy of the European and North American central banks triggered by the financial crisis of 2008, these securities have lost much of their appeal and in some cases even yield negative returns. The current challenge is therefore to identify profitable opportunities in this segment and to use them in accordance with risk-management requirements.
The price development of exchange-traded corporate bonds is more or less closely linked to that of the corresponding corporate shares, depending on their credit rating. However, the use of these instruments in the investment portfolio usually follows a "buy and hold" strategy. In this context, the interim price development of the securities is less significant than the steady flow of yields from the coupon payments. Therefore, a careful assessment of the default risk in comparison to the yields offered is crucial for the successful management of this asset class.
Shares of listed companies are at the core of many strategic portfolio allocations. Due to the relatively high susceptibility to interim fluctuations in value and high setbacks, risk management is particularly important in the management of equity portfolios. A positive effect on the risk structure is achieved not only by diversification, i.e. broad spread, but also by factor selection that is tailored to the market environment. For example, a concentration on low volatility and value in certain market phases can help.
Funds are instruments that are suitable for replicating the performance of an entire asset class at very low cost (passive funds) or for integrating certain investment strategies into the portfolio (active funds). The second group also includes alternative investment funds, such as managed futures and hedge funds, which can be used to reduce market risk. Even tangible assets, such as real estate, are investible through fund wrappers.
Investments or loans to private companies offer additional portfolio diversification. The expected returns on this asset class are typically higher than those of listed stocks, but at the same time, higher risk must be calculated. The challenge for private equity management is a well-founded due diligence of every investment opportunity considered. The current situation of the company as well as the chances for its future positive development have to be thoroughly analysed.
Historically, real estate has always been a core component in high net wealth portfolios. Today, however, the possibilities are much more diverse. In addition to the traditional, direct acquisition of land and property, various participation models are available today, including open and closed real estate funds or shares of real estate investment companies. In addition, loans to real estate developers also offer an opportunity to participate in the still booming real estate market.
Investing in the beautiful, prestigious things is not only a pleasant investment approach, but also one that can certainly compete with unemotional investments if pursued with expertise. Art, watches and jewellery in the top segment can offer high increases in value over time, but often at the price of very limited liquidity and transparency in the markets in which they are traded. A successful investment strategy therefore requires not only expertise, but also the market access of an insider.