Posts in Investment

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. 

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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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Fiducia Partners Insights - Weak Pound Presents An Opportunity For International Investors

Weak Pound Presents An Opportunity For International Property Investors

November 29th, 2018 Posted by Investment 0 thoughts on “Weak Pound Presents An Opportunity For International Property Investors”

Since June 2016 the UK property market has been in a state of flux with many property investors adopting a ‘wait and see approach’. While the uncertainty is down to Brexit there has also been a reluctance to invest in residential property due to the introduction of a 3% stamp duty on second homes and a reduction of tax relief lowering buy-to-let profits making property investment in the UK look less attractive.

However this isn’t the case for everyone. Those who aren’t fearful have been capitalising on exchange rate trends following a significant decline in UK Sterling over the last two years which has benefitted those buying in dollar-linked currencies where the value of the pound is around a tenth below its pre-referendum exchange rate.

Particularly amongst Middle Eastern investors interest in UK property is at a high. This makes sense as Middle Eastern investors who are effectively US dollar buyers due to fixed exchange rates have a currency advantage while the pound is weak. According to property consultant Cluttons, straight after the referendum Middle Eastern investors made up 20% of all property sales to international investors in London.

 

Pound Dollar Exchange Rate

Pound Dollar Exchange Rate

Source: macrotrends.net

 

What’s particularly interesting though is that many international investors are using the weak pound advantage not to invest in London property but in other UK cities like Manchester and Birmingham. London property, and particularly prime property prices have stagnated and dipped over the last few years whereas the average price in regional cities rose between 6-8% in 2017. With London prices so high it is these regional cities that investors think are most likely to see growth in over the coming years. Research I came across by Liquid Expat Mortgages found that in 2017 60% of foreign nationals buying property in the UK chose to buy in Manchester and 25% chose Birmingham. These cities will become even more attractive once the new HS2 rail links to London are completed given that phase 1 is direct to Birmingham and phase 2 links on to Manchester.

There are investors however who are still looking to buy in London. A good example I have seen is FirethornTrust which was formed this year by two US family offices to invest in London real estate assets with a ‘focus on value-add investment and development opportunities’. On their website they say they have ‘no fixed investment periods, no fixed sector focus and no strict return parameters’, conditions than constrain many other property investors. Launching in September with $263million they have already bought Quay House in Canary Wharf for £26million.

What’s more, even after the Brexit deadline of March next year a Knight Frank survey of executives managing more than £500 billion of real estate found than more than 20% would still consider the UK as their top pick for 2019.

So in my opinion, foreign investors unsure about investing in UK property should consider the two possible Brexit outcomes. First if the deal Theresa May recently announced stands then the pound should bounce back which would benefit those investors who buy during this uncertain period as they will take advantage of the weak pound while they still can. Second, despite any outcome and even if resignations and Brexit turmoil persists beyond March, there is still a shortage of housing supply over demand in the UK so prices must eventually rise, you just might have to wait a bit longer to sell at a profit. Despite the uncertainty, I think there is still a strong argument for investing in UK property now and Fiducia Partners specialises in sourcing exceptional private and off-market investment opportunities so please do get in touch with me if you’re considering making an investment.

 

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Fiducia Partners Insights - Co-investing What is it and should you be doing it?

Co-Investing: What Is It And Should You Be Doing It?

November 15th, 2018 Posted by Family Wealth, Investment 0 thoughts on “Co-Investing: What Is It And Should You Be Doing It?”

Co-investing among family offices has been on the rise for some years and a report released last week indicates that this trend is growing. The Campden Research report says that two-thirds of family offices expect to see a rise in co-investing opportunities over 2019. I welcome this news as I think co-investing presents a great opportunity for pooling experience among family offices and for reducing risk by following more experienced investors, which is why I often encourage my families and clients to co-invest. For clarity, co-investing is where a minority investment in a company is made by a limited partner, in this case a family office, alongside a general partner such as a private equity fund manager or venture capital firm.

I first came across co-investing by family offices after the financial crisis when some were looking for new ways to allocate their capital and also to reduce costs. Essentially it was a way of moving away from funds to direct investing without taking on the costs of due diligence and the risk of being the only investor. It was also partially driven by the shortfall of funds where many failed to meet their fundraising goals during the crisis and were using co-investing as a way to attract investors. However this lack of sharing due diligence costs is also why funds are sometimes reluctant to offer co-investing rights. While some of the costs specific to the co-investment will be shared, the fund manager is normally expected to forego the usual management and performance fees based on the understanding that the co-investment is building on work already done by the firm and therefore the fees should not be charged to co-investors.

Co-investing also offers family offices the opportunity to be more actively involved in their direct investments without having to acquire and manage the investment entirely on their own. And for families that have deep expertise in a particular industry or sector, being able to use their knowledge can even lead to outperforming conventional investments in private equity funds. A survey of LPs conducted by BlackRock last year found that 68% reported their co-investments outperformed their traditional private equity funds.

 

LP Survey Highlighting Outperformance of Co-Investments vs. Funds.

BlackRock LP Survey

Source: Blackrock.com

 

It is also worth mentioning that in my experience many company founders and startups often prefer to work with family offices over VCs, so co-investments made by family offices and VCs can be attractive to them. While both are motivated by making a return, VCs can be more ruthless in their approach whereas family offices are generally long-term investors and willing to offer support and advice.

However despite its benefits, I couldn’t write about co-investing without mentioning its challenges. The main one for family offices is access to deal flow. Many family offices, even ones managing exceptional wealth, don’t have the dedicated resources to build relationships that form the basis of co-investing since the sourcing of opportunities is outside their traditional investment circle. This challenge is one Fidcuia Partners can help ease since we have a trusted network and can provide discreet introductions to investment opportunities and support deals to their conclusion.

 

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Fiducia Partners Insights - Paris's Prime Property Boost

Paris Prime Property Benefits From Brexit

November 8th, 2018 Posted by Investment 0 thoughts on “Paris Prime Property Benefits From Brexit”

As Brexit fast approaches, Paris is enjoying a rise in property prices amid uncertainty in London’s prime property market and the UK market in general. A couple of weeks ago I wrote about the dip in demand for luxury property in London and suggested that only those investors that can hold their nerve for the long-term and buy property in bulk at discounts might do well in London right now. In light of this, it seems that many who would normally look to buy in London are turning to Paris instead.

An article in the Financial Times yesterday said that Home Hunts, which finds French properties for wealthy international buyers, received more than double the number of enquiries from UK buyers in the first six months of 2018 than in the first six months of 2017. This rise in interest seems to be due to a range of reasons:

 

  1. International investors are looking for a secure market for their money.

For investors, Paris has always been a popular choice but in the two years since the vote to leave the EU, prime property prices in Paris have risen by 17.5% – a significant amount.

 

  1. Wealthy French expatriates want to move back to Paris.

For wealthy French expatriates domiciled in London, it seems many are considering repatriating to Paris after leaving France in 2012 to escape Francois Hollande’s tax hikes.

 

  1. London’s financial institutions are relocating or opening offices in Paris to safeguard against Brexit.

Since the UK voted to leave the EU, many of the investment banks based in London have announced that they are moving staff to Paris or are planning to open a European subsidiary. According to PwC there are around 2,000 high-paying financial jobs moving from London to Paris or being newly created in Paris as a result of Brexit. French authorities have also offered tax breaks to high-income Londoner’s as an incentive to move to Paris. According to PwC a UK expat in France with an annual income of €1m could take home €180,000 more than they would in the UK. You may also have seen the advertising campaign launched by Paris’ financial district bearing the slogan “Tired of the fog? Try from frogs! Choose Paris La Defense”.

 

Paris La Defense

 

According to the director general of the French public body that manages the French financial district the campaign aimed to roll out “the blue, white and red carpet for thousands of professionals now seeking new European headquarters.”

Before the referendum, 85% of European-based hedge funds were based in London, in a few years’ time it will be interesting to see by how much this has changed. With Brexit on the horizon and Macron’s pro-business policies appearing to work, it looks as though Paris is likely to keep growing as a rival for London’s prime property market. Watch this space…

 

If you enjoyed my article please let me know by leaving a comment. I really do appreciate it!

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