Family Office
We Want Liquidity Data – And Fast, Family Offices Tell Providers
Regular data about liquidity is an essential requirement for family offices – it's information they seek from firms such as Apex Group. And the frequency of these reports is intensifying as markets become more difficult.
As interest rates have risen and financial markets taken a more
volatile turn, family offices are not prepared to wait for the
usual three-month intervals to check how much liquidity they
have if they need it. Some of them want weekly data.
Uncertainties about the timing of capital calls for private
equity investments, for example, add to the increased workload
that is being created for family offices.. But such requests
for information are all a part of the job at Apex Group in Jersey.
This news service recently spoke to Lucia Perchard, head of
family office product at Apex.
“There is far more scrutiny of liquidity…people are more
interested about things such as capital calls. We have moved into
a period of intensive active management,” Perchard said. “We are
trying to make sure they [family offices] are given information
they need to manage liquidity. They are moving money around to
try to get as much return as they can. Capital calls are coming
through much faster.”
“Now, we are giving monthly reports of liquidity rather than on a
quarterly basis. In some cases, it is weekly – it depends on the
position of a family. With that comes support that is needed to
provide liquidity in moving funds,” she continued.
This news service spoke to Apex at a time when wealth management
practitioners in the Channel Islands have been busy helping
clients navigate through the reefs and shoals of financial
markets. A few days ago, for example, Standard Chartered in
Jersey
explained how intensifying requests for solutions for credit
and mortgage-related matters was a theme.
Keeping clients on top of their liquidity position is food and
drink for a business such as Apex Group.
“The liquidity reports that family offices are looking
to vary significantly. They are essentially looking for a
consolidated overview of their outgoings in various currencies,
as well as the liquidity profiles of their investments and
assets. What makes compiling these liquidity reports more
complex, is when they are invested in money market funds across
multiple currencies,” Perchard said. “At present, the uncertainty
around the timing of potential capital calls is also creating
challenges.”
It is not all about managing risk, she said. “For those who are
well informed on their liquidity positions, they are able to
maximise their returns and deploy cash into more long-term
illiquid investments,” she said.
Financial worries have driven home important realities.
Where people own non-financial assets such as yachts, they are
realising that these are more of a cash drain than they were
previously comfortable with, Perchard said. With private market
investing, this area has gone from a “nice-to-have” to a
“must-have.” Family offices need to watch their
liquidity exposures here, for example.
Following the hiatus caused by the pandemic, some capital that
could have been deployed is still sitting with family offices, so
there is a fair amount of “dry powder” available, she said. And,
in a time of considerable volatility and flux, this can create
opportunities for investors with the ability to spot undervalued
companies, etc. There are more potentially distressed assets
available for purchase.
Payment delays, management of cashflows and bills remain
important concerns that family offices need to be on top of, she
said.
When times get difficult, the appeal of real assets is easier to
understand.
“Every family office has got real estate and that is not going to
stop,” Perchard said. Some FOs are interested in gold, she
said.
“Families are increasingly looking for deal flow which meets
their investment requirements and reflects their values. Of
course, they do not want to be deluged by approaches from
investments which are not relevant to their family’s investment
criteria – and we are seeing a growing adoption of digital
platforms (such as Apex Group’s Profilir) which allows them to
narrow search parameters and review potential opportunities in a
more time and resource-efficient manner,” she said.
“Most family offices have significant real estate holdings – and
many of our clients are reassessing their real estate portfolios,
with valuations currently looking high and expected to drop
across multiple jurisdictions,” she said.
Perchard said her clients have been wary of cryptocurrencies
– she made this point before news broke of the FTX
collapse.
“Among our client base, we are seeing significant caution around
investment digital assets, including cryptocurrencies,” she
said.