Managing and overseeing assets and investments
Different approaches to managing and growing wealth
Different approaches to managing and growing wealth.
How to safeguard, grow and best use the family’s wealth is a family office’s top priority. We found that the ways in which this is done vary greatly across location and family preference, with some choosing to manage all their assets internally, others engaging external wealth managers, and yet others drawing on both. Some have family members closely involved in decision-making; others employ trusted nonfamily people in key roles to drive investments. All the families we spoke to are in the hands of third or fourth generations and have made philanthropy a core part of what they do.
Today, Placements Italcan Inc is a shareholder in Saputo Inc, but the Francesco Saputo family is no longer involved in its operations. With $1 billion in AUM, the family’s focus is now on investing.
Whereas many – even most – family offices begin as the investment arm of a family business, the Saputo Family Office (Placements Italcan Inc) came to investment independently, and built up slowly. With the blessing of her parents, for almost two decades, Patricia Saputo grew the family fortune by investing in stocks and bonds, before shifting its focus to private equity.
“Because of my wherewithal in accounting and tax, I started out by focusing on accounting and tax compliance, insurance, financial savings, tax returns, estate plans, and succession planning,” says Saputo. “I didn’t co-mingle the technology or the people with the family business (Saputo Inc), I started from scratch. I eventually expanded the investment portfolio because the publicly traded company (Saputo Inc) was paying quarterly dividends, and those dividends needed to be invested.”
Saputo’s investment decision-making is driven by human capital; being inspired by people who know their sector very well and can make a strong case for investment. This is the beginning of her due diligence on the opportunity before investing – mostly in the North American market.
Going forward, Placements Italcan Inc will devise a meritocracy-based investment committee of well-qualified, knowledgeable people that may include some family members, and some not, to guide its investments.
Investment decision making is managed by committee at the Miami-based Grupo Económico Maldonado (GEM, or Maldonado Economic Group) – the Maldonado’s family office.
“Our Investment Committee is the most formal of our committees. It operates via quarterly meeting and has an investment policy statement. We also have an operating agreement, which guides the purpose of the Investment Committee and sets general guidelines on how to interpret the will of ownership, and our risk tolerance,” says third-generation family member Alexander Degwitz, who chairs GEM’s Family Council and Investment Committee.
The Investment Committee comprises three family members and two nonfamily members, including GEM’s asset manager and a former hedge fund manager.
“It's a semi-open forum where people can listen in; we try to be inclusive for all family members to learn in the process. It’s useful for the wider family to understand how we make decisions and what investments we're making. Often, they go on to invest in the same thing for the benefit of their own portfolios.”
GEM invests heavily in real estate and technology, and in what Degwitz describes as “atypical investments” in both Venezuela, and the United States.
“We have hard parameters like allocation of equity, fixed income and alternative investments, then we come up with investment opportunities, which we run by the Investment Committee. For example, we speculated with interest rate swaps when interest rates were around 3 per cent and ended up trading those out a couple years later with very good performance.”
The Huillinco Family Office manages a significant investment portfolio, which was bolstered by the merger and partial sale of Derco shares to Inchcape.
These assets are distributed across a diversified portfolio of liquid fixed income and equity assets. Eighty per cent of the office's portfolio is invested in liquid assets, including stocks, bonds, and structured notes. Most of its investments are in developed markets, primarily in the United States and Europe. The remaining 20 percent is invested in what the office's Director, Andrés Del Río, calls "alternative assets," which include private equity, private debt, and real estate.
"We take advice from external advisors, then a general investment committee with representatives from the three families, our holding company, and the investment advisor jointly decides how we allocate assets or implement new investment ideas," explains Del Río.
Del Río's direct family office is one of three within a multi-family office that encompasses related branches of the family, all descendants of the original wealth creator. Investment decision-making is conducted by committee, with each of the three family offices having its own internal investment committee that decides its final position, based on the recommendations of an overarching general investment committee.
There are also similarly structured committees for the interests of each family office, and areas of assets and investments: asset allocation, alternative assets, and national and international economic outlook. These committees have emerged and evolved along with the growth of the offices and are currently undergoing review.
The unofficial family motto of learning to do by doing has informed Vesta Family Office President Max Fortmuller’s approach to managing and growing the family wealth.
“We launched our office right at the beginning of the global financial crisis (GFC) in 2008. We rode the rollercoaster all the way down and back up again, like everybody else in public markets did,” says Fortmuller, who is also the CEO of Vesta Wealth Partners.
Fortmuller built out the family’s investment portfolio back in 2011. It originally hinged on diverse public market equity strategies and asset allocations, including passive and active strategies, Canadian mandates, and global mandates. But over time, heeding learnings from the GFC, Fortmuller set out to build risk averse portfolios with better diversification than the public markets offer.
Many current clients were clients of the multi-family office that Fortmuller transformed into Vesta Wealth Partners who have chosen to remain onboard – indicating their trust in Fortmuller and his team. Fourth-generation family matriarch Dagmar is involved in an ownership capacity and has her own holding company that is also a Vesta Wealth Partners client.
“We are a fully regulated investment management shop, and we also allocate to private and public markets. We utilize options to manage public market risk. The philosophy is, if you manage the risk, the performance will take care of itself. But it's very hard to get alpha in the public markets, so we allocate outside of the public markets.”
Under Fortmuller’s watchful eye, Vesta Wealth Partners’ AUA have grown to more than CAD$850 million. It plans to grow further.
Unusually for a family office, the Vermeer Family Office does not have an investment portfolio as such, but significant wealth to distribute via shareholder dividends.
“I know for most folks in the family office world, somebody initiated a liquidity event and there’s money to manage. Here, we’re a little different. We’re more about trying to keep a family group – the Vermeer family group – cohesive. We’re very custom in that way,” says nonfamily member and Senior Family Office Manager Aaron Smith.
The family office oversees the distribution of dividends and offers wealth management support to the Vermeer family’s 80 members, as well as philanthropic activities. As a faith-based organization, the Vermeer Family Office has a particular take on community responsibility.
“We are very concerned with the community aspect of what our business means to our employees, our customers, our suppliers – to everybody. The family group takes a larger view of that, and that informs our longer-term vision, including our shareholder pledge and expectations.”
Family members have been involved in the work of Vermeer Charitable Foundation since the early 1970s, both as directors and as officers. Three generations of the Vermeer family shareholders now serve as directors on the Board of the Foundation, which is primarily focused on education and scholarships, environmental protection and business mentoring, and disaster relief.