Why private equity appeals to wealthy families

There is a growing interest in investing into private equity amongst wealth families with over $10 million, particularly those who made their wealth through running operating businesses themselves.

"We’ve noticed that private equity typically resonates very well especially among those families who generated their wealth by running operating businesses themselves," observes Martin Pelletier, Portfolio Manager and OCIO at TriVest Wealth Counsel Ltd, in the Financial Post, 27th September, 2016.

Pelletier goes on to quote from the most recent UBS Global Family Office Report: "We are not alone in this observation as the 2016 Campden Wealth-UBS Global Family Office Report highlights that the average family office has a 22% portfolio allocation to private equity. Approximately two-thirds of this is done through direct and co-investing rather than private equity funds. This makes some sense as it provides more control over the investment process and families can better utilize their previous hands-on business experience." (Read the whole article here.)

Wealthy families who have run their own operating companies have a comfort in understanding the due diligence required to get a grasp of the business and why capital needs to be tied up for a long time period. They also understand why there is also a higher risk premium for illiquid exposure expected to generate higher returns over the long run.

One caveat for those interested in private equity is that access to quality private equity deals is the critical requirement to achieving the returns to cover the higher fees.

Jacoline Loewen, UBS Bank (Canada), author of Money Magnet: How to Attract Investors to Your Business, (Wiley). You can follow Jacoline on Twitter @jacolineloewen

Boring the way investing should be

Mawer Investments Jamboree 2016 and Jacoline Loewen

What a great evening hosted by Mawer Investment Funds who ran a Calgary style jamboree for the Make a Wish Foundation. Mawer have as their tag line for their business: be boring, make money. It is true that Mawer funds are rated well but their style of entertaining for a good cause is far from dull.

Boring: The way investing should be

Before I got into the wealth management business, I was working in corporate finance and trying to get companies to sell to private equity. That was definitely exciting, and the returns were double digit or zero - really exciting. Now that rate of return sure is thrilling to vision but the downside is not as attractive.
I have since learned that keeping a large pool of your investments in safer pools of investments is actually the main target of wealth management, which does mean lower returns than Venure Capital investing. Those private investment,double-digit returns can still be attained by using small capital investments which will not break ou if you lose the entire deal. You can still have the excitement of investing in early stage entepreneurs without betting the house.

Short term combined with long term

It is sort term and long term thinking combined.
So think about what is exciting as a potential investment - go ahead. Discuss it with your friends at the golf course. Then think long term. Do you have an income stream from your investments until you are a 100 yars old? After that, by all means, beat on the next business investment your buddy shows you. Your family will thank you for sticking to that long term outlook though.

Boring the way investing should be

Mawer Investments Jamboree 2016 and Jacoline Loewen

What a great evening hosted by Mawer Investment Funds who ran a Calgary style jamboree for the Make a Wish Foundation. Mawer have as their tag line for their business: be boring, make money. It is true that Mawer funds are rated well but their style of entertaining for a good cause is far from dull.

Boring: The way investing should be

Before I got into the wealth management business, I was working in corporate finance and trying to get companies to sell to private equity. That was definitely exciting, and the returns were double digit or zero - really exciting. Now that rate of return sure is thrilling to vision but the downside is not as attractive.
I have since learned that keeping a large pool of your investments in safer pools of investments is actually the main target of wealth management, which does mean lower returns than Venure Capital investing. Those private investment,double-digit returns can still be attained by using small capital investments which will not break ou if you lose the entire deal. You can still have the excitement of investing in early stage entepreneurs without betting the house.

Short term combined with long term

It is sort term and long term thinking combined.
So think about what is exciting as a potential investment - go ahead. Discuss it with your friends at the golf course. Then think long term. Do you have an income stream from your investments until you are a 100 yars old? After that, by all means, beat on the next business investment your buddy shows you. Your family will thank you for sticking to that long term outlook though.

Christine Lagarde talks about Canada and the IMF

Christine Lagarde and Jacoline Loewen in Toronto 2016

It was an honour to spend time with Christine Lagarde, IMF, and hear her views on the world and the future. She touched on many topics such as Brexit, China and women in finance. She was also highly complimentary about the Canadians she had met and our finance ministers (she has worked with three ministers of finance).

The event was on the front page of the Financial Post:

Christine Lagarde, who spoke at an event hosted by The International Economic Forum of the Americas in Toronto Monday, said that the backlash against globalization represents one of the biggest threats to the global economy.

“Those who suffer from globalization need to be helped along the way, we cannot just have growth that benefits some and leaves many without skills, without retraining,” she told the audience.

“The first thing that is needed is to have some growth — my grandmother used to say that everything is better with butter,” said Lagarde. “If you have more growth, you can deal with your debt … more jobs are being created, it’s much easier.”

What is wealth management

Wealth management is a common term used by financial advisors in front of their clients, but is it understood? Most clients with portfolios over $2 million in accumulated wealth may be surprised to learn what is available to them now that they are millionaires. 

Jacoline Loewen, Business Development for Wealth Management

Forrbes magazine had a good article asking the question: 

What is wealth management?

Wealth management is very straightforward. From the affluent individual’s perspective, wealth management is simply the science of solving/enhancing his or her financial situation. From the financial advisor’s perspective, wealth management is the ability of an advisor or advisory team to deliver a full range of financial services and products to an affluent client in a consultative way.

Specialized expertise

Theoretically, a wealth manager can provide every single financial product in existence.  In reality most wealth managers specialize in services and products they have experienced. This is where a large wealth manager will be able to offer a more diverse service and be able to call in the expert teams around the different products sch as hedge funds, ETFs or structured products or PPNs.

It all starts with you

A further defining quality of wealth management is that it is delivered in a consultative manner. By being consultative, wealth managers are truly client-centered. A good wealth manager meets a client without any presupposition about what financial products or services are appropriate for that affluent individual.

While it is common for a wealthy individual to be sitting with a wealth manager to address a particular need (investment management, say), the consultative wealth manager’s overriding objective is to understand the person and find out what’s important and why. Then the wealth manager is able to bring in the appropriate experts and provide the appropriate financial products.

You can follow Jacoline Loewen on Twitter: @jacolineloewen