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.