With illiquid assets such as private equity and real estate remaining important areas for ultra-high net worth clients, reliable, actionable data on these sectors is critical, the author of this article argues.

Wealthy investors are willing to pay a certain price to hold illiquid assets such as in hedge funds, private equity funds and real estate portfolios, due to the low yields available on other, often more liquid assets. Clearly, as past market episodes have shown, lack of liquidity can be a problem in certain situations, particularly if there is a mismatch between the liquidity requirements of an investor, and the assets they hold. On the other hand, there remains considerable interest in insights around investment ideas such as the "Yale Model" (based on the university''s endowment fund and its asset allocation philosophy), where clients are encouraged to avoid over-paying for liquidity and capture long-run superior returns said to come from illiquid assets.

At conferences held by Family Wealth Report, the editorial team have been struck by how the attractions of illiquid assets for family offices and other wealth management organizations remains a talking point. And in that context comes Bob Miller, chief executive and vice chairman of Private Client Resources LLC. The editors are delighted to share his views with readers and invite readers to respond. Email tom.burroughes@wealthbriefing.com

A much sought after but often secretive wealth segment, ultra-high net worth families with assets in excess of $30 million, concentrate 12 per cent of US wealth in less than 3 per cent of the population. That’s 72,000 families with $13 trillion of $90 trillion in investable assets.in the US. That is barely enough people to fill a modern sports stadium. Select the top $10 trillion and you will find only 12,000 families – they could have a party at the Taco Bell Arena in Boise, Idaho.

This is an extremely interesting group of families -  and they pose a set of equally interesting challenges for their investment advisors. That’s because up to 50 per cent of their portfolios’ investments are locked up in illiquid assets - including hedge funds, private equity and real estate-based businesses. Throw in family business interests and that percentage rises to about 60 per cent.

With this kind of asset allocation, getting a clear, full-picture view of portfolios - one that is flexible and extensible enough to be of genuine value - is especially critical to the UHNW investor.

Yet normalizing the many incoming data flows, reporting and investment returns, and putting them in a single, digestible, easily understandable format, can be a nearly impossible task. Many of these data sets use different words to describe similar concepts - and timelines, platforms and reporting formats vary. 

At the same time, ensuring data is flexible and extensible enough to be of true value is more important today than ever before.

This is what we like to call “Total Wealth Normalization” providing a 360-degree wealth view across their entire portfolio and balance sheet, where all of the pertinent data can be easily deciphered across various platforms and asset classes to provide a total wealth view across the entire portfolio and balance sheet for UHNW families.

As families’ wealth grows - and attitudes and needs evolve with the “millennial shift” - the ways in which they think about their investments, and their futures, will continue to become more complex.
Today’s UHNW wealth management serves a more engaged, more connected client who requires a comprehensive view of the family’s entire portfolio.

Whether it is a single family or multi-family, first-timers or multi-generational, once a UHNW family leaves the world of equities and enters the realm of illiquid investments - where reporting can be unreliable and transparency can be elusive - obtaining a full accounting of the total value of all its investments has never been more challenging. And the need has never been greater.

We believe high quality data is the springboard for a more informed, forward-thinking strategy – one that is critical for ensuring the future growth and wealth of the most powerful, fastest-growing class of investors.