Posts in Investment

Fiducia Partners Insights - Fundamental Principles for Investing Success

Fundamental Principles for Investing Success

September 13th, 2019 Posted by Investment, Planning 0 thoughts on “Fundamental Principles for Investing Success”

No investment is without risk but as seasoned investors will tell you there are a few principles you can follow for making better investment decisions. The principles I have listed below all try to help you to focus on that which is in your control rather than taking chances on that which isn’t. 

1.Define your investment targets

Investing is not an end in itself. Whether you’re looking to meet a specific need or investing for future generations the target will define the strategy. However when defining targets I would never recommend investing for the ‘short’ term. Short term usually means high risk. When buying an investment at a favourable price it may take time for the market to recognise its true value and for you to make a healthy return. 

As Warren Buffet says, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

2.Find your risk tolerance

No one enjoys losing money but some can tolerate the risk of losing money more than others. I’ve spent a lifetime investing and working with investors and most set their expectations on returns too high but are not prepared to take the corresponding risks. Finding your risk tolerance should include an assessment of what you could withstand to lose, should your investments not pan out, and still remain in a stable financial position. If you’re not prepared to risk even that then you’re on the low risk, low reward path. 

3.Don’t be blinded by greed

No one likes to think of themselves as greedy yet it often blinds people from seeing reason. Many investors have regretted investments that supposedly offer high and safe returns but what they fail to see are the hidden costs and risks involved. It goes back to the saying, if something seems too good to be true, it probably is.

4.Diversification is vital

Diversifying so you’re not over-exposed to any given asset type, country, sector or stock is critical and a small amount of diversification provides enormous benefits. Five investments are better than two, ten are better than five but this is only true until you get to the point where the costs for adding additional investments become greater than the benefits. 

5.Think and act intelligently

Many investors are successful in building a sound investment portfolio but fall when they fail to stick with it when the markets falter. Successful investors don’t allow themselves to be swayed by the latest news and short-term variables. Patience and stamina are required. 

6.Review regularly

As asset values rise and fall your portfolio can shift away from your risk profile and objectives. You may need to adjust your original weighting and regular reviews also give you a chance to consider your own circumstances.

7.Remember what your money is there for

While there’s a lot to be gained from a good investment strategy and careful money management, remember, not every penny must be invested for profit. Money is also there to be spent on what makes you happy, on what makes other happy. That too is valuable. 

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For more of my insights into the world of family wealth visit the Fiducia Partners website

Fiducia Partners Insights - Investing For Your Great-Grandchildren

Investing For Your Great-Grandchildren

August 2nd, 2019 Posted by Family Wealth, Investment 0 thoughts on “Investing For Your Great-Grandchildren”

For many ultra-wealthy families a successful investment is one that lasts decades and benefits generations. Making investments that will still generate income for your great-grandchildren is not easy but it is the way that many family offices need to think. Such investments don’t tend to be exciting and high-risk but are wellconsidered and require patience.

I see a lot in the news about how so-called millennials are shortsighted, wanting instant gratification and not looking beyond short-term goals. In other words, they don’t have patience. But in some ultra-wealthy families, millenials will now be inheriting investments and investment strategies that have spanned generations. They will become stewards of wealth that may have been preserved for 5, 6, or 7 generations. With this kind of wealth and legacy there is no short-term thinking and holding investments for 100 years or more and creating strategies to match is not uncommon. 

Creating an investment strategy that covers the next 100 years forces you think about how you might weather all the difficulties that could hit the market, be it a war, depression, economic crash, or climate change. Take family owned wine and champagne houses as examples. Many have been owned for generations and still nurture the soil in the vineyards that their great great grandparents bought. The Codorníu family has been producing wine for four hundred and fifty years and has had vineyards on their property since 1551. While the company leaders in each generation will have taken the business in a slightly different direction the overall aim to be able to pass the company to the next generation hasn’t changed. They may not have a detailed investment strategy that looks beyond 20 years but decisions about planting grape vines takes long term vision, as they can produce for hundreds of years. At the family owned Louis Roederer champagne house, they began preparing for climate change in 1999 by developing techniques to train the vine roots to push further down into the soil and started farming organically and biodynamically to adapt to the more extreme weather conditions that we’re seeing and will likely only intensify. Without this long-term view the increasingly dry summers and flash downpours could have ruined their much-prized vines. 

In other industries too you often see influential families leading innovation in the knowledge that it may benefit them in the long term. The Swedish Wallenberg family has recently invested around €300 million in AI programs in Sweden because it wants the country to catch up in the global AI arms race which is not only necessary for the country as a whole but also the companies that they control. Two of their companies, Ericsson and Saab use a lot of advanced software and antenna technology so if Sweden’s infrastructure falls behind in those areas so too does their company. The large investment they have made doesn’t directly benefit them and their company in the short term but will do in the long term, which is the time frame in which they are thinking. 

Outside of ultra-wealthy families very long-term investments are common in large institutions such as churches, universities and schools. Oxford and Cambridge university colleges collectively own 126,000 acres and have held on to some of their property assets for hundreds of years or plan to. Oxford University Queen’s College owns an Isle of Wight farm bought from Henry VIII and Trinity College owns a 999-year lease on the O2 arena indicating their long-term ambitions for the asset. 

Like Oxford and Cambridge, family offices also tend to favour growth assets like property, which often make up a large portion of their portfolios as they have historically performed the strongest over many decades. Such assets may be subject to market fluctuations in the short-term but in the long-term the trend has been up.

These are just a few of the ways ultra-wealthy families may use their investments to benefit their great grandchildren and beyond. It is sad however that I have also seen some families fail to think long term and preserve their wealth with one of the main reasons for failure due to a lack of preparedness on the younger generation’s part. It’s my opinion that families must fully prepare the next generation for the wealth transfer as if training them for any skilled profession. Managing and growing wealth is not a project that can be done on the weekends, it takes dedication, skill and of course patience. 

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Fiducia Partners insights - Investing in AI

Investing in AI: The Potential and the Pitfalls

July 18th, 2019 Posted by Entrepreneurship, Investment 0 thoughts on “Investing in AI: The Potential and the Pitfalls”

This week I wanted to write about something that might provoke you to think about a new investment area. Artificial Intelligence. I can’t profess to be an expert in this sector however AI is a technology many investors and entrepreneurs are very excited about so I have done my research and am continuing to do so as the technology evolves. 

Artificial Intelligence has been big these last few years and is only set to grow as the technology evolves. According to industry research firm TechEmergence, AI technology will have the single most radical, transformational impact on business and society. We all already have virtual assistants like Siri and Alexa in our phones and in our homes. But beyond virtual assistants, a PwC report estimates that between revenue from new services and the cost savings it delivers due to improved productivity, AI will add $15.7 trillion to the global economy by 2030

For personal use Google, Microsoft and Apple have been integrating AI technology across their products but it’s also a key technology in the development of self-driving cars and algorithms that e-commerce companies use to predict what you might want to buy based on your online behaviour. It’s also already being used in healthcare to preempt health issues – I read that in one UK hospital it managed to reduce cardiac arrests by 20%. And last month Amazon was granted a US patent for drones to provide “surveillance as a service” looking for signs of break-ins or people lurking around the property so it could inform the police. 

Industrial companies are using AI to automate machinery, monitor data about production processes and make adjustments in real time, learn and operate machinery and equipment without needing human help. With the advancement of the technology there are possibilities for autonomous trucks, which will allow for 24/7 runtimes. 

There is also huge potential in the water and electricity industries where companies are looking to replace aging and no longer fit for use infrastructure with smart solutions that integrate AI, sensors and internet communication. Such solutions are likely to allow for better data and analytics leading to more efficient use of resources and reduced costs.  

But however exciting the prospects for AI are, there are still lots of unknowns about it and how the technology will evolve and be used in households and businesses in the future. As many others will be, I am cautious about the future of AI and how its use will be governed. In terms of its commercial use, it seems to be being used in some fantastic ways but the debate often comes back to its negative role in society by making jobs redundant. In the news only this week the IPPR think-tank released a report projecting that 10% of women, and 4% of men are at high-risk of losing their jobs to machines. 

Beyond the risk of job losses, there are other concerns too about how far we go with the technology.  Elon Musk this week revealed plans to connect human brains to a computer as part of his vision to allow for “symbiosis with artificial intelligence”, as he put it. This to me seems quite alarming. Elon Musk is well known to be an eccentric entrepreneur with a high-risk appetite for investing but there’s no doubt he’s involved in the cutting-edge of future technology. Perhaps what for most of us seems futuristic and alarming right now could well be the norm in 10, 20, or 50 years time. As investors we have to decide whether we’ll take the risk and invest in the unknown or if we’ll stay true to our core industries. 

One family that has taken a giant leap into AI investments is Sweden’s Wallenberg family. The family is one of the foremost investors of artificial intelligence in Europe, investing around €300m in its AI program WASP, in a mixture of AI startups and a business transformation company. Their large investment is motivated by their hope that Sweden will catch up in the global AI race which they think is necessary for the country as a whole, but also the companies they control. They can’t afford to lag behind. 

I would suggest that for most investors AI remains a niche investment area that if they can tolerate high-risk they might consider entry into. Laith Khalaf, a senior analyst at Hargreaves Lansdown, advises caution saying that investors need to try and remember the lessons of the tech stock boom which had largely been littered with failure. In essence, I think it’s not for the uninformed or those who just have a ‘fear of missing out’. Early investors of success stories will no doubt make large profits but AI is here to stay so there will also be future opportunities to get involved when there are less unknowns. 

Fiducia Partners Insights - What is a family office?

What is a family office?

July 4th, 2019 Posted by Family Wealth, Investment, Planning 0 thoughts on “What is a family office?”

The term ‘family office’ is not widely known, and for good reason. While there is no strict definition, a family office is a wealth management company which invests assets on behalf of wealthy individuals or families. The term is not well known because quite understandably these families don’t need, or want, to advertise the fact that they have money to invest. If they did they would be inundated with requests. There are both single and multi family offices, single are normally run by a family member or appointed CFO who looks after one family’s wealth and multi are run by professionals who serve more than one family. 

Family offices tend to be so discreet they are only really contactable through highly selective referrals and trusted networks. As one executive said at a family office conference in Dubai last year, “we’re the most important part of the investment landscape most people have never heard of”.

And not only do family offices discreetly manage the family’s investments, they manage all the financial affairs of a family such as staff wages, accounting and tax planning, property and estate management and succession planning – while running businesses and making investments generates wealth, without proper financial planning and succession planning, preserving wealth is very challenging. Therefore family offices do everything it takes to generate and manage wealth to ensure it will be passed safely down from generation to generation.

Now, not every wealthy family has a family office, but those that do often choose to have one to avoid having to pay someone else to manage and invest their money, thereby increasing their margins. It also allows them to invest without the sector and time constraints that traditional VC firms have, usually trying to exit in 5 years or less. Because of the emphasis on passing wealth down through the generations, family offices tend to make long-term investments which is why real estate often makes up a significant part of family office portfolios. 

How do you find family offices for investment?

For those seeking investment from family offices, you will have to work hard to find them, let alone get in contact. Finding family offices is really a case of networking and receiving personal introductions. Without already knowing the right people finding a credible person, such as a capital raiser, to introduce you to family offices is a good way of starting. There are also several family office conferences each year which can provide a ‘way in’ however I am aware of several families who tend to avoid conferences, particularly those where start-ups pay a fee to present in front of investors. 

When seeking family offices for funding, to avoid wasting your and their time, it’s important to ensure that your business aligns with the family office’s investment criteria and philosophy. Many tend to invest in companies that directly or indirectly relate to the core business upon which their success is built. Also unlike VCs, who are often brutally focused on the figures, family offices value having good chemistry with the person they are funding. Therefore after having received an introduction, getting along with the family office decision makers, usually the investment manager and family patriarch, is essential to receiving their backing.

From my knowledge of family offices, however, all the hard work it takes to be introduced is worth it. Family offices make great investors for entrepreneurs because of their focus on relationships. Of course they want to see a return on their investment but because they take a long-term approach they tend to have more patience than institutional and private equity investors while also serving as experienced mentors with excellent connections. 

For more of my insights into the world of family wealth visit Fiducia Partners insights

Fiducia Partners Insights - Passion Investing An Introduction to Classic Cars

Passion Investing: An Introduction To Classic Cars

February 14th, 2019 Posted by Investment 0 thoughts on “Passion Investing: An Introduction To Classic Cars”

Investing in your passions can be extremely rewarding and for many of the world’s wealthiest people this means investing in classic cars. Making passion investments not only allows you to enjoy your wealth but also diversifies your portfolio and has the potential to provide a return.

Today the London Classic Car Show begins and 40,000 owners, collectors, experts and enthusiasts will attend so I’ve decided to write an introduction to classic cars as a passion investment.

Firstly, like any passion investment, and I have previously said the same about investing in fine art, I don’t believe you should invest in classic cars unless it is a real passion of yours. That said, there are still returns to be made and over the past 20 years cars have made phenomenal tax free gains. While this has slowed over the last couple of years, according to the 2017 edition of the Coutts Passion Index since 2005 average prices of classic cars rose fourfold.

This increase coupled with the tax exemption of cars is a big lure for those thinking about them as investments but they also require a significant amount of upkeep and maintenance, more so than some other passion investments. Classic cars require huge amounts of maintenance and original parts can be rare and expensive. 

While investing in classic cars is not one of my passions, I have helped many of my clients find their next car investment or seek specialist advisors and over the years I have gathered that there are a few key considerations when it comes to investing in classic cars.

 

1. Seek Independent Advice

For those who want to start investing in classic cars the first thing you should do is to seek independent advice. For every model there are thousands of particulars that affect the value of the car and an independent advisor can steer you towards good investments. They can also help you by inspecting and verifying potential acquisitions for authenticity to make sure you’re not duped by unscrupulous sellers.

2. You Need To Love It

There’s no guarantee that any classic car you buy will appreciate so like any passion investment make sure you buy a car for the love of owning and driving it. To minimise risk it’s also a good idea not to view cars as a central component of your investment portfolio and to only use surplus funds after the base and core elements of your portfolio have been set. 

3. Rarity is Key

Rarity is a key driver of demand and asking price with classic cars along with owner history. The cars that command the most value have had as few owners as possible and come from low-production runs. Provenance and the profile of past owners also has an impact on the value and stability of a car’s worth. 

4. The Less Restoration The Better

A car in an unrestored state means it won’t have had patches cut out and welded in and it can be restored to the highest standard. Finding classic cars in an unrestored state is becoming more of a rarity but with the right connections or broker you have a better chance of hearing when such cars become available, often when an owner dies.

 

Along with these considerations, the main piece of advice everyone who invests in classic cars gives is to not lose sight of the joy to be had from classic cars and to remember that you’re buying them first and foremost as a hobby, rather than an investment.

If you’re thinking about investing in you passions, please don’t hesitate to get in touch with me and I would be delighted to make an introduction to the right specialist to help you. 

 

If you found this week’s article useful, I would be very grateful if you could let me know by leaving a comment.

Fiducia Partners Insights - Understanding The Property Cycle And How To Use It

Understanding The Property Cycle And How To Use It To Your Advantage

February 7th, 2019 Posted by Investment 0 thoughts on “Understanding The Property Cycle And How To Use It To Your Advantage”

“The next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war” – Fred E. Foldvary (1997)

In my opinion knowing what the property cycle is and how to use it is crucial for all property investors. By knowing the phases and learning to look for certain signals to work out which phase is on its way investors can make smart decisions about when to buy and when to sell. 

It is generally agreed that there are four phases in the real estate cycle and economists have found that a cycle lasts, on average, for 18 years. While it is often difficult to ascertain which phase any given market is in there are certain signals you can look out for that help you to make smart investment decisions. 

For many years I have bought and sold prime property, both for my clients, and myself so want to share with you what my experience tells me about the real estate cycle and how to use it to your advantage. Below I detail the four phases, how you can try to identify them and how you can take advantage of them. 

 

 

Phase 1: Recovery

Typically the most difficult phase to identify, this phase occurs when the property market is recovering from a recession. Demand remains low for quite some time after a recession and few new builds come to the market so it can seem like the market is still in decline or stagnation but by watching for the right signs such as gentle increases in viewings you can start to see when the market is recovering. If you can identify it, this is the smartest time to invest. Investors have to be brave to buy at this point but it can be worth it when the next phase arrives. During this phase investors shouldn’t rely on borrowing to be able to buy because at this point in the cycle banks are often still struggling to recover from the effects of the recession.

To help identify the recovery phase investors should look out for big companies and pension funds buying distressed portfolios. This is a good sign that the market is recovering as these companies have the market intelligence to buy early in the cycle but can’t take too big a risk. Berkeley Group for example announced record annual profits last year but warned in a shareholders note that they would experience a slump in profits going forward because its stock of cheap land was running out. In its note Berkeley says it was able to buy lots of land in prime locations from 2010-2013 (when the market was recovering from the global crash) as it was in a cash rich position compared with other companies.

 

Phase 2: Expansion

Then comes what is known as the expansion or ‘explosive’ phase where it is obvious that prices are rising so everyone begins to buy again and banks lend again. This phase also brings with it enough confidence in the market that building projects start again and property prices begin to increase faster than wages. Meanwhile smart investors that bought property at the bottom of the market should be selling during this phase. At the phase’s peak property is normally so in demand that even properties that wouldn’t have caught anyone’s attention a few years earlier can often go to sealed bids. For example you may remember the 114sqm studio flat in Fulham that was London’s most viewed property last year due to its £250k price tag. 

 

Phase 3: Hyper Supply

As the explosive phase reaches it’s last few years property investors absolutely want to avoid buying at this time when it won’t be long before the market slumps as demand begins to decline while new developments continue to be completed. In my experience you can identify when this phase has arrived because highly ambitious building projects, planned at a time of high confidence and lending in the market, are announced. Such ambitious projects are often completed after the crash occurs and sit empty. Take the Shard as an example, where the ten luxury flats near the top are still unsold seven years on. 

 

Phase 4: Recession

This phase is when property prices crash, banks withdraw lending, building activity stops and businesses close down, causing knock on effects on the economy. When the recession happens, you will see lots of companies and investors who have over-leveraged themselves go bankrupt which triggers forced selling and even lower prices. This is when investors willing to take on high risk investments can acquire distressed bank-owned properties and partically completed building projects at low prices. Investors with slightly less nerve can wait for signs of recovery, like Berkeley Group did in 2010, and use the money made when selling during the expansion phase to buy low and wait for prices to rise and the cycle to begin again. As no one can predict how long it will take for prices to rise again, investors taking this approach should be prepared to make a long-term investment. 

 

Fiducia Partners specialises in sourcing, acquiring and disposing of prime property all over the word. For help making smart decisions with your investment capital please do get in touch and we will be delighted to talk with you. 

Fiducia Partners Insights - Five Locations To Buy Property in 2019

Five Locations To Buy Property in 2019

January 24th, 2019 Posted by Investment 0 thoughts on “Five Locations To Buy Property in 2019”

The UK prime property outlook is dominated by Brexit and what will happen when, or perhaps ‘if’, the UK leaves the EU on 29th March. I’ve written before that international property investors with a penchant for risk and the ability to make long-term investments would be smart to buy in London now and take advantage of the exchange rate. For American investors, the exchange rate offers an effective 25% discount on properties and when the economy resumes growing, as the Bank of England expects it to in 2023, the market will bounce back and the profits will make up for the foreign buyer tax. However to minimise risk, it is wise to buy best-in-class assets in good locations.

For those investors looking outside the UK, here are a few up-and-coming markets that I think it would be wise to consider for investment this year.

 

Lisbon, Portugal

While in Europe, Paris has been a key market for many property investors, I suspect that the growing popularity of prime property in the Portuguese city of Lisbon will justify interest from investors looking for European property outside Paris. Ten years ago in 2009 Portugal introduced a range of tax benefits for EU and non-EU citizens to encourage direct foreign investment after the Global Financial Crisis. These tax benefits along with the Golden Visa scheme operated in Portugal have contributed to skyrocketing prices in Lisbon. In some of the more sought after areas of Lisbon, such as Lapa and Avenida Liberdade, prices have risen more than 60% since 2013. 

 

Egypt

I would suggest Egypt too as an alternative place to consider for property investment this year. The property sector there has recently been growing at more than 20% and whilst there is a vast amount of property due to complete this year the rapidly growing population and strong demand is likely to keep prices growing. Growing prices are also justified by the current high inflation rates due to an economic reform programme, significant increases in the price of oil and that most purchases are made with cash (although it is worth noting that the prolific use of cash to purchase property is being cracked down on with new legislation designed to curb tax evasion and the black market).

The country’s President Abdel Fattah el-Sisi also recently removed the last restrictions on foreign ownership of land and property in Egypt. Some think there is a bubble about to burst so it would be wise to look to buy mature projects from solid developers that could withstand a crash if it were to happen. If you can tolerate some risk and are tempted by Egypt, you might consider an investment in the country’s New Capital, to the east of Cairo, which is expected to see lots of activity over the coming years.     

 

Tokyo, Japan

Tokyo will soon be in the world’s spotlight by hosting two major international sporting events. In September of this year it hosts the first Rugby World Cup ever to be held in Asia and in 2020 it hosts the Olympic Games. In anticipation the city is enjoying unprecedented growth with rising rent prices and increased foreign capital driving up property prices. There is of course the possibility that it could all end once the Olympics are finished so anyone looking to capitalise on the current upward trend should do so quickly.

 

Long Island City, America

In America, normally high-performing markets like Miami and Manhattan have been stagnant for several years whereas tech capitals like San Francisco, Austin and Boston have climbed and are expected to keep going. It is no surprise that high-earners in the tech sector have been creating strong demand in cities where supply is limited contributing to a doubling of prices in some areas over the last ten years.

While not yet a tech capital, you might want to take a look at Long Island City in Queens, New York which is where, after much speculation, Amazon announced this month that it has chosen as the site of its second corporate headquarters. The headquarters will employ 25,000 people with many of them high earners so demand for property to buy and rent in the immediate area around the HQ is likely to rise sharply.  

 

Berlin, Germany

Last year I also wrote about Berlinas an excellent city to invest in and I don’t think this has changed. Berlin’s population is growing rapidly and whereas residents used to be happy renting due to stable prices, with the city’s increasing population rent prices are going up and so is demand to buy. 

 

I hope you enjoyed this article this week and if you did that you will leave a comment.

Fiducia Partners Insights - Is Investing In Art A Good Or Terrible Idea?

Is Investing In Art A Good Or Terrible Idea?

January 17th, 2019 Posted by Family Wealth, Investment 0 thoughts on “Is Investing In Art A Good Or Terrible Idea?”

Art and visiting exhibitions is one of my greatest enjoyments and so this week I decided to write about the fine art investment market. Often referred to as a passion investment, investing in fine art generally has more to do with the joy of owning a particular piece than it does about financial gain. Owning a rare or well-known piece evokes feelings of prestige and status, an attractive lure for many of the world’s wealthiest people.

Investing in art is particularly popular right now, helped by high profile sales like 2017’s auction of Leonardo da Vinci’s Salvator Mundi at Christie’s. The painting sold for $450.3 million, setting a new record for the most expensive painting ever sold and creating an astounding profit for the seller who bought it for $127.5 million in 2013.

However most art investors will tell you that despite the potential for return, you should only buy a piece of art if you love it. Unless you’re buying the most rare and coveted pieces like Salvator Mundi (and even some dispute that painting’s authenticity) you really cannot know if the value will go up or down so buying it because you love it is important.  

As with any investment, there are some big risks to investing in fine art so it is not a decision to take lightly. In many ways, the risks are bigger than that of investments in stocks or bonds which can easily be liquidated unlike art where owners often have to wait a long time before the right buyer comes along. The value of a piece of art is also highly subjective and because of the secrecy in the market it can be hard to determine what similar pieces or other works by the same artist are valued at or were last sold at. If buying (and selling) fine art using a specialist auction house this also means adding huge fees to the price with commission commonly in the region of 20%-50%. Once bought there are other costs to consider such as insurance premiums and storage costs. For example a very valuable painting should be kept in a temperature and humidity controlled strong room to ensure its future value.

Also, as many will know, one of the biggest risks in the art market is that of fraud or forgery. Both are common and the onus is on the buyer to check a piece’s authenticity, provenance and legal ownership meaning due diligence is crucial. Even when an investor or organisation has the best resources at their disposal to steer them away from fraudulent and forged pieces it can still happen. Last year for example the Metropolitan Museum of Art had to give up two pieces within a month of purchase after it was found that one, a vase, was looted by tomb raiders in Italy in the 1970s and the other, a bull’s head, was stolen from a warehouse in Lebanon during the civil war in the 1980s. 

Minimising Risk

To minimise the risks of investing in fine art, the first thing to do when considering a piece is to find out all the information you can about its condition, its provenance, its history, any ongoing maintenance costs, if there are any restrictions and if it is still within copyright etc.

You also need to check on the reputation of the seller and if they have any protections in place for buyers. You want to avoid anything that could jepodise the purchase or cause you to lose your investment. For example if the seller is insolvent at the time you purchase the piece, the seller’s creditors might be able to seize the piece, even after it has been paid for.

In order to determine provenance there are a lot of details to collect and the seller should normally provide records such as a certificate of authenticity, any export licences and documents like wills and estate inventories. International databases of lost and stolen art should also be checked. Note that the art market is a largely unregulated industry and there is no central record of art sales and ownership, which can make it hard to find out about a piece’s history (and easy for fraudsters).

This lack of regulation may seem alien to many investors where in the financial market, heavy regulation makes it illegal to trade on nonpublic information and publicly traded companies must disclose relevant information to investors at the same time to avoid some gaining an advantage. However in the art market insider information is traded all the time, making it hard for a newcomer to join in without seeking advice from established insiders. Far from being an illegal activity, using insider information is a staple of the art market and is a key reason why some make a success of it and others don’t. An example would be if an art dealer has prior knowledge that a major museum plans to show a lesser-known artist they could use that information to sell some pieces to a prospective collector.

If you’re considering delving into the world of fine art investments please do get in touch with me as I have many trusted contacts in the art world and would be delighted to provide an introduction. 

As always, I am very grateful when people who like my articles click on the thumbs up icon above or leave a comment.

Fiducia Partners Insights - Four Reasons To Rebalance Your Investment Portfolio

Four Reasons To Rebalance Your Investment Portfolio Now

January 10th, 2019 Posted by Investment, Planning 0 thoughts on “Four Reasons To Rebalance Your Investment Portfolio Now”

Portfolio rebalancing is something people rarely do despite being essential for any investment strategy. As all investors know, considering goals, risk tolerance and timelines to determine the right portfolio allocations takes time. But by not monitoring your portfolio and rebalancing it every now and again it can easily stray from your intended allocations. This is because different parts of your portfolio almost always generate different returns and the risk profile of different assets continually changes. Therefore I think it is good practice to rebalance annually and often take stock when the new year rolls around. 

To begin you need to find out whether you need to rebalance your investment allocations and by how much so you need to know what they currently are. This means totalling up all your stocks, bonds, cash and other investments to calculate the percentages of each asset class and type. Once you know what your percentages are and by how much they differ from your strategy you have to decide how you will rebalance. There are two ways to main ways to rebalance a portfolio:

  1. By using new money. When adding new money to a portfolio, the money should be allocated to those assets in asset classes that have fallen. For example, if bonds have fallen from 40% of the portfolio to 30%, to rebalance you would buy enough bonds to return them to their original 40% allocation. 
  2. By selling “winning” assets to buy more underperforming ones. This forces you to buy low and sell high, which is difficult for some investors as they don’t want to part with winning assets although taking profits from your winners is often a wise strategy. As Sir John Templeton said: “The four most expensive words in the English language are, ‘This time it’s different’.”

There are several benefits to rebalancing your portfolio. Here I go through the key benefits in an effort to encourage you to do it regularly, something which is often far down on peoples’ priorities.

Maintain Risk Levels

One of the key benefits of rebalancing is to maintain roughly the same level of risk in your overall portfolio. Asset allocation is all about balancing risk and reward and depending on the direction of market fluctuations you could end up taking on risk that is either greater or smaller than you originally intended.

Review Performance

Rebalancing your investment portfolio also gives you an opportunity to review fund performance and make changes. For example, for funds that are underperforming you can sell them off and look for others.

Make Strategy Adjustments

Our tolerance for risk changes are we grow older and as we go through other big life changes. In general investors start off willing to take more risks but they become more conservative as they grow older. When reviewing your portfolio with a view to rebalancing it, you can also take the time to alter your investment strategy according to changing tolerance, financial goals and time frames. 

Prevent ‘Analysis Paralysis’

One of the other key benefits I see to rebalancing is that it helps to prevent ‘analysis paralysis’ where you can spend so much time trying to work out the best way of doing something that you end up doing nothing at all. Rebalancing as a periodic activity takes some of the emotion out of investing and ensures you draw up a plan and review it periodically in a way that you can stick to knowing you have done a formal review based on rational considerations. In theory this will help you avoid panic selling at the bottom of a market and buying at the top. In essence, it maintains a disciplined approach to your investment portfolio strategy.

Please let me know if you enjoyed reading this article by clicking on the thumbs up icon above or leaving a comment. I really appreciate it. 

Fiducia Partners Insights - How I Buy Off-Market Property

How I Buy ‘Off-Market’ Property

December 6th, 2018 Posted by Investment 0 thoughts on “How I Buy ‘Off-Market’ Property”

For many years I have specialised in buying property for my clients and in most cases my clients wouldn’t have found the property without my help. This is because they are normally private or ‘off-market’ properties where the property for sale hasn’t been advertised and so my contacts have been the key component. The reason I am able to find exceptional off-market properties for my clients is because I have spent years developing relationships and building my reputation with people in the property market.

In general, there are three ways I source off-market property investment and purchase opportunities:

 

  1. By being given advanced notice

Where an owner might be waiting to put a house on the market in the spring or summer, often to show it in good weather conditions where the garden looks beautiful, one or two people may be chosen to view it before it officially goes on the market. This is often so the seller can test the waters and gauge interest before putting it up for sale whereupon a ‘clock’ begins ticking and the longer a property is on the market the less appealing it becomes. Who is chosen to view it depends on who the appointed estate agent knows and trusts which is why I value my connections so much. Having the right connections means I often get contacted and given advance notice before a coveted property is formally listed for sale with agents.

 

  1. By approaching an owner directly

If I have seen or been made aware of a property that meets all of my client’s requirements, even if the current owner is not looking to sell, I often approach them to see if they would be amenable to selling if the right offer was made. You might be surprised to know that owners can often respond quite positively to such an approach.

 

  1. By being introduced to private opportunities 

It is not uncommon for an owner to appoint an estate agent to sell their property but they want to keep the sale private and confidential. This is often the case where the property being sold is particularly high value and the seller wants to stay out of the public eye. Understandably they don’t want the location and value to be subject to scrutiny or publically known. In these cases I will often be required to sign a confidentiality agreement stipulating that I will only show the property to selected clients of mine who themselves are often required to enter into confidentiality undertakings before details of the property or its owner are disclosed.

 

Buying off-market has several advantages. First, it is often the case that the really exceptional properties will never make it to market so having someone with the right contacts is essential if a buyer has any chance of seeing these. Off-market sales also remain the main way that most of the beautiful country houses are bought and sold as well as the best London town houses. Discretion is key to many such deals.

Buying off-market property also has the advantage of there being less competition meaning that as the buyer you are in a stronger position because you don’t have to worry as much about the seller receiving better offers. It is also normal for time to be less of a factor because the lack of other potential buyers means there is no rush to close the deal before someone else does. This also means that both parties are often far more relaxed and reasonable when negotiating. It also allows time for trust and tax planning that is often associated with such deals.

However the lack of time pressure can sometimes become a frustration for buyers who want to buy quickly. A seller could take several months to consider an offer and because there are no commitments with selling off-market there’s no incentive to speed up the process or even to sell. Sellers can withdraw the property at any time without having to worry about losing money through auctioning or advertising.

There are however situations where the need for a quick deal is a factor although this requires slighly more sophisticated buyers who are comfortable with such transactions. Risk factors need to be understood since this is where fraud and money laundering are often considerations.

In general though I think buying off-market is the best way to find exceptional properties without the pressure that can come with other ways of buying such as through estate agents or at auction. If you’re looking to buy a beautiful property but haven’t found the right one through conventional methods, please do get in contact with me and I will be delighted to assist you to find one.

 

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