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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