Why family offices and alternative investments offer real added value

Anyone who sets up a foundation and entrusts it with their wealth is always pursuing a specific purpose. This purpose can be to safeguard and protect family wealth as well as to serve the general public. In order for the institution to fulfil its purpose, however, it not only needs a good internal organization, but also a wealth management that secures it for the future in a forward-looking and sustainable manner. This is particularly important as foundations are predominantly designed for perpetuity.

It is precisely in this area that family offices have enjoyed growing popularity in recent years. As independent partners, they enjoy the special trust of their clients, as they are exclusively committed to their interests and objectives. At the same time, they bring a high level of expertise to the foundation sector and open up access to previously untapped alternative asset investments through their extensive networks.

So how much is there to the good reputation of family offices and why are "alternative investments" the new "must-have" of the foundation culture?

Foundations are facing two major challenges today:

The conflict between the need for returns and the need for security

Apart from a few exceptions, every foundation is obliged to maintain the wealth on which it is based. In particular, the long-term performance of the capital should be ensured so that the foundation's purpose can continue to be promoted in the future to the same extent as today.

This is a major challenge, as foundation capital is subject to economic factors such as inflation and interest rate fluctuations just like any other capital. In order to remain efficient in the long term, it is essential to invest wisely.

This forces founders and board members to look for options outside of what they are familiar with in order to secure their assets in the long term in real terms, i.e. while maintaining purchasing power - ideally with a professional partner who recognizes and understands their needs.

The desire for expertise and transparency

The search for new perspectives quickly raises questions about existing assets and structures: How is the foundation's portfolio actually set up and does this fit into the current capital market situation? Have service providers been selected appropriately and are they acting in the best interests of the foundation? Are there opportunities to reduce investment risks? Which options are still unused and could open up new opportunities?

Answering these questions requires fundamental analysis, an independent perspective and fundamental experience - criteria that family offices like FINVIA fulfill.

Centralized, independent, experienced: The Family Office offers founders a professional point of contact

A family office concentrates all aspects wealth management in one place: Where board members and founders previously had to stand between contacts themselves and compile and analyze data from different sources, it steps in as a professional advisor and offers transparency through comprehensive controlling and reporting.

In addition, a family office has its own experts in the various disciplines and offers both the necessary experience and the required resources. It is the ideal point of contact when it comes to reviewing and optimizing existing investment strategies and developing new ones. A service that is particularly interesting with regard to the integration of illiquid investments into the foundation portfolio.

However, the biggest advantage of a family office compared to traditional investment advice is its independence. As a freely operating company, it is not bound by sales or placement interests and acts exclusively in the interests of its clients. For this reason, it not only enjoys special trust, but also offers substantial added value.

Strategic asset allocation with a focus on foundation-specific criteria

The basis of every sustainable investment is the strategic asset allocation for the wealth. Based on the client's objectives and risk appetite, this is divided between various asset classes in order to best meet the foundation's needs. In the past, portfolios mostly consisted of purely liquid assets such as equities or bonds, but the trend has now changed.

Due to the market fluctuations and low interest rates of recent years, conservative strategies alone are generating lower returns and appear increasingly uncertain. A development that was quickly recognized by family offices. The professional consideration and implementation of illiquid investments reduces risks and at the same time increases returns to an attractive level.

From pure liquidity to alternative investments

As an independent partner, the Family Office opens up new asset classes for foundations

Alternative investments include illiquid investments such as real estate, private equity and impact investments, which are of particular interest to charitable foundations due to their connection to environmental and social issues and their ESG compliance. Founders and board members benefit from the family offices' excellent networks. They open up access to funds that are denied to the masses - at attractive and institutional conditions.

If the foundation is set up for eternity, why not its asset strategy?

Does an illiquid investment planned over several years really make sense? The answer is often yes. Especially for foundations, whose wealth is designed for perpetuity, the investment horizon is also ad infinitum. Accordingly, their investments in particular should be future-oriented and forward-looking. Illiquid assets offer good returns, are subject to fewer fluctuations and often score points with investors thanks to an additional illiquidity premium.

In this context, investments in real estate and private equity should be mentioned in particular, which can develop their advantages well in a foundation portfolio. But here too, a high level of expertise in selection, review and support pays off.

The magic word is "diversification"

Of course, implementing illiquid investments does not mean having to completely forego liquidity. The decisive factor is a balanced diversification of wealth - both at the level of asset classes and within them. The deliberate use of illiquidity is an important factor. Additional diversification by region and sector and the choice of different fund managers allow higher returns to be achieved with less fluctuation.

Sound expertise is essential for this. No wonder that board members and founders are increasingly relying on the specialist knowledge of family offices: Thanks to their high level of specialization and practical experience, they have both the necessary expertise and the sensitivity to correctly interpret needs and translate them into suitable strategies.

Everything at a glance: The controlling and reporting services offered by family offices relieve the burden on all parties involved

Central controlling and reporting for family offices not only guarantees compliance with regulatory requirements, but also permanent risk monitoring. FINVIA, for example, provides its clients with daily updated data on all investments online and prepares them optimally for the foundation report. If increased risks become apparent, wealth management can intervene quickly and make adjustments to provide additional protection for foundations, their capital and, not least, the foundation's board members.

But when does it make sense to consult a family office?

Basically, it is never too early or too late for a consultation. If the foundation is already actively investing, the family office will support it in analyzing and strategizing its portfolio and providing all associated services. However, cooperation also offers significant added value even before the foundation is established:

Thanks to its wealth of experience, the family office can provide advice right from the start and give initial impetus even before the legal implementation begins. The earlier those responsible start planning, the more secure the start will be later on.

Conclusion: Relief, added value, perspective: the family office offers foundations an attractive alternative to traditional investment advice

As a central point of contact for all wealth and investment issues, family offices have long since established themselves as neutral advisors with independent financial expertise in the foundation sector. They provide access on all asset classes as well as long-term, transparent portfolio management. Especially now, when high fluctuations are increasingly unsettling board members and founders, they open up new opportunities through alternative forms of investment and thus serve as a reliable partner in all matters of asset management.

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