What Have Family Offices Learned From The Great Recession?

Expecting a possible recession in 2020, most family offices made a move to cash, for its safety and opportunity value. They didn’t want to be left on the sidelines as in 2008.

Some have reduced leverage because of risk. 

However, since the stock market crash earlier this year, some of the richest families have added loans and purchased stocks.

The investments weren’t in the $millions they were in the $billions.

Now with the market at precarious levels, they are realizing their profits and buying such assets as real estate and private equity.

This year almost half of family offices are planning to invest more in private equity and a third are putting more into real estate, especially directly. They still believe that long term, liquid investments will give superior returns.

Direct investments are preferred, as they give more control. In fact 16% of family offices aim to increase direct property ownership next year.

They can take advantage of distress in the property market.

There are many opportunities, but they need close scrutiny to achieve positive results.

There are fears about recession, but confidence that the right purchases will deliver the best results.

This is particularly important as bond rates are historically low.

Investing in real estate is not just about securing better returns, but also preserving wealth for future generations.

As over the long term property values always go up, it protects against inflation.

Driving the increase in this type of investment, are the rising number of family offices.

They source valuable luxury properties in prime locations, also residential and commercial real estate.

It is an important part of their allocations. Many are considering property that provides rental income as well as capital gains, or funds, depending on the preferences of the families and experience in the offices.

Since the emergence of Covid-19 there has been a focus on emerging trends, opportunities and threats like technology.

All property types won’t be affected in the same way. Offices, retail, hotels and other hospitality properties are cause for concern, while warehousing, logistics, agricultural and certain types of residential, like single family units might go up in value.

Apparently, it is doubted that hedge funds are able to conserve value in a downturn, and the fees are disliked.

Gold is another favored option for inflation and wealth protection. 12% of family offices expect to add to their holding of it next year. In 2011 it hit a record high of $1917.90 an ounce, and it’s back in that price range again.

The current recession won’t be exactly the same as the last, but there will be similarities. During and after 2008 family offices were over cautious, and missed many opportunities. It seems they don’t intend to make the same mistakes this time around.

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