RECAP: 2018 FOX Autumn Global Investment Forum
  | Presenter: Session Description: This session shared the perspective of a private equity entrepreneur and a significant institutional investor who works with his son to develop their family’s long-term investment approach. The family shared how their investment program has evolved from concentrated private equity holdings within their single-family office to a systematic, global, factor-based multi-asset approach for themselves and other families. They outlined a long-term stewardship approach that encompasses private, alternative and public investment strategies, and which challenges a conventional asset allocation approach. |
- As a family moves away from wealth creation into wealth stewardship, a different approach and different skills are required to make this transition. The Van Wielingen family moved away from a large, concentrated position in the company that created their family wealth - as part of a 100-year plan.
- The family considered the challenges to address in creating a 100-year stewardship plan, including: underperformance of active managers; difficulty in selecting successful managers over an extended period; high costs associated with global investing; difficulty in aligning the goals of managers and investors; home country bias; and behavioral biases. The family felt that neither consultants nor active managers added value (citing studies showing they detract value). This caused them to build a robust model and manage the assets internally.
- The family established a set of principles and beliefs that helped shape their stewardship plan. A critical element is the belief that long-term portfolios should have a global, low-cost, liquid, foundational strategy underneath higher-risk entrepreneurial investment activity. Rules-based, systematic asset allocation is a superior framework to achieve goals and protect capital and the family has conviction that there are indisputable benefits in investing globally.
- Every investment decision is active. The only true ”passive” investment approach is owning everything available in all global markets. Any decision to allocate to one asset class, geography, or manager is an active one.
- Following their stewardship plan, the family has shifted over time from a portfolio 100% invested in an entrepreneurial venture, to an asset “pyramid.” Their asset allocation pyramid has four categories – 1. Global Beta (low-cost, global, liquid portfolio), 2. Quantitative Asset Allocation (a systematic factor-based overlay to adapt the Global Beta portfolio based on pre-determined signals.), 3. Alternatives, (with expectation of “absolute return” niche-oriented hedge and private equity/credit strategies) and 4. Entrepreneurial Investments (primarily direct investments). With this balance, they believe there is zero risk for total permanent family loss of capital over the long-term and it provides a low-cost program with less reliance on outside parties and enables each generation to tailor the plan for the long-term (over 50-year periods).