FAMILY OFFICE

ELITE SPECIAL EDITION

BNY Mellon Cory McCruden

FAMILY OFFICES - UHNWI - WEALTH - PHILANTHROPY- FINE ART - LUXURY - LIFESTYLE Subscription $100 per year www.familyoffi ceelite.com

DOMOS FINE ART

FINE ART DOMOS CONSULTANTS DOMOS FINE ART has a portfolio of very Fine Art on sale (Off Market) on behalf of our clients which include works by Caravaggio, Renoir, Monet, Van Gogh, Matisse, Rembrandt, Picasso, Rouault, Bonnard, Raphael and more. DOMOS FINE ART is experienced in dealing We off er the following services with rare off -market Valuation and Sale of Fine Art collections of fi ne art. Locate specifi c pieces of Fine Art Assist in verifying provenance of Art Auction representation

UK Offi ce | TEL: + 44 (0) 29 2125 1994 | SKYPE: domosfi neart | [email protected] | www.domos.co.uk FAMILY OFFICEELITE MAGAZINE

WHAT IS A FINE ART FAMILY OFFICE US CONGRESS INVESTING ENACT NEW TAX FOR FAMILY OFFICES EXAMINATION 03CAPLIN & DRYSDALE 37

ROLLS ROYCE BERNIE MADOFF BLACK BADGE THE INSIDE STORY ON 25 EXPOSING MADOFF FRANK CASEY 11 43

VIDEO ADVERTS MAYBACH THE FUTURE OF ADVERTISING SESURITY & PROTECTION WITH THE 600 GUARD 17 53

IMPACT INVESTING FAMILY OFFICE IN THE FAMILY OFFICE MULTI-FAMILY OFFICE SELECTION HOLLAND & HOLLAND 21 EXPLORE THE WORLD OF 57 ANTIQUE WEAPONS AFRICA THE SAFRA OPPORTUNITIES FOR FOUNDATION FAMILY OFFICES SAFRA FOUNDATION MAKES ING BANK DONATION TO CLINATEC 25 35 61

1 FAMILY OFFICE ELITE MAGAZINE GULF STREAM 63 100TH G-560 COREY McCRUDEN Cory McCruden BNY Mellon HADHUNTERS 71 Wealth Management, Advisory Services PROPER EXECUTIVE PLACEMENT

SUPERYACHT 73 CHARTER - LUXURY VACATION

FAMILY OFFICE 7 WHAT TO DO WITH CASH 77 MAN-VS-MACHINE INVESTMENT MANAGEMENT 79

PRIVATE BANKS 83 WITH AN INVESTMENT FLOVOUR

AUTHENTICITY IN THE ART MARKET 95

IMPACT AND 101 PHILANTHROPY OTHER STORIES... • FRANCK MULLER - P.91 • SPIRIT YACHTS SHOWCASE - P.93 • SCIENTIFIC EVIDENCE & ART FORGERIES - P.97 • ALTERNATIVE RISK MANAGEMENT - P.107 • QUALITATIVE OR QUANTITATIVE - P.113

2 WWW.FAMILYOFFICEELITE.COM What is a Family Offi ce?

Tom McCullough

Family offi ces originated over 100 years ago when the asset requirement is considerably less than that of wealthy families, mostly in the United States, hired single-family offi ces, typically from $10 or 20 million dedicated staff to manage and coordinate their diverse of net worth up to $500 million. fi nancial aff airs. They were designed to look after investment management, tax planning, succession, Whether operating as a single-family offi ce or a mumulti- insurance, philanthropy and a myriad of other needs family offi ce, an important characteristic of the famfamily particular to the family. Names like Rockefeller, offi ce is their intimate knowledge of the family’sfamil Carnegie, and Pitcairn are among the best known in values and generational issues, ass well as ‘institution‘institutional North America. In Europe, private banks have been the memory’ of the family’s aff airs.irs. This allows the famfamily main vehicle serving the wealthy and have been doing offi ce principals to speakk intelligently with third-partythird-pa so for over 300 years. experts (accountants, lawyers,wyers, etc.) and be a source of general advice and counsel to the family on importantimporta There were often several reasons that drove families to issues as they arise. set up a family offi ce. Another benefi t unique to multi-family offi ces is tthe • Assets had grown to a size where full-time professional resulting purchasing power. It provides participatingicipati management was required; families with access to the widest range of investment • The family members were frequently too busy or opportunities and the top tier of advisory services at a didn’t feel qualifi ed to handle the increasingly complex lower cost than if each single individual or family were fi nancial issues brought about by their wealth; or to contract those services on their own. When all is said • A liquidity event, such as the sale of a business, and done, the real value of a family offi ce is having a required a signifi cant range of coordinated decisions. trusted team of advisors to coordinate all the diverse aspects of a family’s fi nancial lives. Most family offi ces oversee the aff airs of single families. A relatively recent phenomenon is the multi-family Tom McCullough is Chairman and CEO of Northwood offi ce, which has arrived along with the proliferation Family Offi ce a leading global multi-family offi ce based of wealthy families in the past 20 years. Multi-family in Toronto, Canada and author of the new book “Family offi ces serve the needs of more than one family, and Wealth Management”(http://amzn.com/0470824298).

3 FAMILY OFFICE ELITE MAGAZINE

SUPERYACHTS INTERVIEW WITH CHRIS CECIL WRIGHT

Family Offi ce Elite had the opportunity to interview We have clients who enjoy chartering in the Med but Chris Cecil-Wright, who launched Cecil Wright & also many clients who wish to venture further afi eld Partners as a boutique superyacht brokerage two years and incorporate elements of extreme sports and ago. Specialising in the purchase, sale, build and charter adventure into their travels. Many people also now use of superyachts. a superyacht as a base for “extended family” holidays.

WHY ARE SUPERYACHTS SO POPULAR AMONGST THE WHAT IS IT THAT YOU DO BEST? WORLD”S WEALTHIEST INDIVIDUALS? The most important aspect of our business is understanding people, and not boats! Knowing about Ultra-high-net-worth individuals enjoy not only the superyachts is a necessity but the diff erence is in the freedom that life on the water brings but also the detail and having a more intuitive approach to what privacy that a superyacht off ers. A stay in the fi nest we do. We take valuable time in getting to know our hotel just cannot compare with the facilities and levels clients, understanding theireir desires anda then we can of service on board a luxury yacht but most importantly, pre-empt their requirements.nts. We always aim to surpass the privacy that is achieved by being able to go where expectations and our mottoo is “Fewer Clients, Serviced you want, when you want and with no one else around Better.” is something that money can’t buy. As demand for the highest levels of luxury and the ultimate facilities on YOU HAVE A PASSION FOR FEADSHIP. CAN YOU EEXPLAINLAIN board has developed, a superyacht also manages to WHY? eff ectively amalgamate a place of work and leisure. We work very closely with Feadship,eadship, who,who inn my opinion, Many of the yachts that we have for charter have both build the fi nest boats on thehe water today.oday. They have board room and business facilities as well as extensive the ability to not only createte the t wow factor but also leisure and sports facilities. They are also the perfect deliver the technical wizardry. Their attention to detail environment for entertaining. Our clients want to is second-to-none, and they just do a great job! have recreate everything that they have in their homes on been responsible for the constructionnstruction of someme of the their yacht, so when working with them on the design largest Feadships in recent years, including the 77.77.7m and build or even just a charter, we go to great lengths TANGO, the 78.5m HAMPSHIRERE II and the 99m MADAME to ensure every aspect of their life is replicated. A GU. I have also represented thehe buyers and sellers of 15 superyacht enables people to travel to unbelievable pre-owned Feadships, so I doo know Feadship well andan destinations but with the highest levels of comfort. am always impressed.

5 FAMILY OFFICE ELITE MAGAZINE HOW DOES SOMEONE EVEN START THE PROCESS OF yachts. I can then put together a Dream Team to create BUYING OR BUILDING A YACHT? the perfect yacht for the client. Many people decide that they want to own a superyacht having initially tried chartering. This gives them a taste WHAT DOES THE FUTURE HOLD FOR CECIL WIGHT & of the reality that being on a yacht brings and it is very PARTNERS? enticing! As a broker, we guide clients through the entire I started the business two years ago, having been a process and talk through the options available, whether Director of Edmiston for twenty years previously. I to buy or build a yacht and all that those options entail. am enjoying the challenges and rewards of having my I will take clients to the shipyard and talk through the own brokerage and am looking forward to the future. process as well as introducing them to designers, naval We have a small team based in our offi ces in Monaco architects, etc. and London, and we are keen to remain small and focussed. We off er a low-key, discreet and very personal This is where the relationship that I referred to earlier approach, and we don’t want to lose that as our clients is so important. It is vital that clients trust their broker really value this aspect. The world of superyachts can and are confi dent in their experience, knowledge of the be somewhat brash, but that is not what we are about. market and ability to get the job done. I have a small Even our marketing materials are a little bit diff erent team of experts working with me at Cecil-Wright, so – we send our clients and potential clients a quarterly we off er a very personal but specialist service with newspaper rather than a glossy brochure! extensive knowledge of sailing yachts as well as motor

14TH - 15TH JUNE 2016 MILLENNIUM GLOUCESTER LONDON, UK

UNIQUE The Agrimoney Investment Forum programprogra has been DESIGNEDÒWITHÒQUALIµEDÒENDÒINVESTORSÒINÒDESIGNEDÒWITHÒQUALIµEDÒENDÒINVESTORSÒINÒMINDÒkÒSPECIµCALLYÒ VIP OFFER FOR FAMILY OFFICE ELITE READERS OUTLININGÒTHEÒIMPACTÒINVESTMENTÒINÒAGOUTLININGÒTHEÒIMPACTÒINVESTMENTÒINÒAGRICULTUREÒCANÒHAVEÒONÒ AÒPORTFOLIO ÒANDÒWHATÒRETURNSÒCANÒAÒPORTFOLIO ÒANDÒWHATÒRETURNSÒCANÒREALLYÒBEÒMADEÒÒ We have a limited number of complimentary 2-day passes for The Forum will ensure thathat you are fully up to date with the &AMILYÒ/FµCEÒ)NVESTORS latest agri investment trends and will allow you to make 0LEASEÒCONTACTÒ*OANNEÒ/AKES INFORMEDÒDECISIONINFORMEDÒDECISIONSÒWHENÒWORKINGÒWITHÒASSETÒMANAGERS [email protected] ORÒCALLÒ+44 (0)207 202 0910

www.agrimoneyinvestmentforum.com /FµCIALÒ-EDIAÒ0ARTNER

6 WWW.FAMILYOFFICEELITE.COM CORY McCRUDEN VICE PRESIDENT BNY Mellon Wealth Management, Advisory Services

Cory McCruden is a leader of BNY advancing gender equality and Mellon’s Wealth Management leads the Investor Committee business working with family for the 30% Club-Canada. The offi ces and their advisors around 30% Club is an organization the world and is currently based in that believes gender balance on Toronto. boards not only encourages better leadership and governance but Bringing over 14 years of contributes to better all-round experience in investment banking, board performance. We asked Ms. consulting and working with private McCruden to write about the 30% clients and institutional investors, Club, and the following is in her she helps clients with succession own words Management business, I became planning and meeting their overall chairperson of the Investor Group wealth and investment goals. Studies show that women tend to for the 30% Club-Canada. The 30% save less and invest less than men. Club launched in the UK in 2010— Cory is a Vice President and Wealth At the same time, women tend to by Helena Morrissey, a BNY Mellon Director of BNY Mellon’s Wealth live longer—that leaves them less executive—to promote a voluntary Management business in Canada. prepared fi nancially for retirement. eff ort to have a minimum of 30% Passionate about supporting As the boomer generation ages, the women on FTSE-100 company entrepreneurs and committed to fi nancial services industry needs to boards. In Canada, the S&P/TSX 60 advancing gender equality, Cory do a better job of addressing the Index is at 20.8%. So we still have leads the Investor Committee retirement and planning needs of a way to go. for the 30% Club-Canada. She women of all ages. obtained her Master’s degree at My role with the 30% Club- Yale University, is originally from Research has shown time and again Canada, gives me an opportunity New York City, and now lives in that companies with a diverse to work with Canada’s top business Toronto with her husband, who workforce are better positioned leaders and investors to broaden is an Assistant Professor at the to serve a diverse audience. So it the pipeline of women at all levels, University of Toronto, and son. makes sense that fi nancial services from schoolroom to boardroom. companies with a proportionate Ms. McCruden is a mentor through number of women in executive What’s most important is Catalyst and Women in Capital positions are often better able that helping women advance Markets and is a member of the to understand and anticipate the professionally isn’t a woman’s steering committee for the 30 % needs of women as investors, as issue: It’s a business issue. Club-Canada. well as employees. Businesses that understand that, and strive to empower all their She is passionate about supporting When I moved to Canada in 2014 to employees, can be more successful. entrepreneurs and committed to support the growth of our Wealth It’s that simple.

7 FAMILY OFFICE ELITE MAGAZINE WWW.TIMELESSGALLERYGROUP.COM [email protected] TIMELESS GALLERY THE BEAUTIFUL,BEA UNIQUE, AND VALUABLE, IN ONE PLACE

The new era of art collecting is here. Timeless Gallery attention to every single detail. From the showroom’s Group is run by Joanna Segelstrom, who has more design to the personal service off ered to clients and than 25 years’ experience in the fi elds of fi ne arts and the professionalism of the team, there is plenty to contemporary art and the young entrepreneur Mikael surprise even the most jaded investor. The gallery is Segelstrom. Proof of this professionalism is the couple’s a creative hub and staff members have revealed that expanding empire that now comprises seven galleries; several regular clients had never thought of collecting six in Europe and one in Miami, Florida. The latter is an art before entering the gallery for the fi rst time. example of the strong professional relationships that Mikael developed in the United States. TGG doesn’t sell art – it provides a base for understanding its enigmatic world, off ering people the opportunity to The Segerstroms’ success is due to good artist defi ne their taste, support artists, enter the world of management, impeccable taste, painstaking attention free expression and, of course, to build knowledge of to detail and strict client confi dentiality. Most of us will the business. Many clients are invited to TGG’s private be familiar with the maxim that holds that success will art villa in Benahavís, one of the most desirable spots in arise from following your passion, and this is exactly Europe, to enjoy the fi nest pieces of TGG´s collection. what the Segelstrom family has done. Moreover, they turned Timeless Galleries into not only a hotspot for art After experiencing a couple of days in an environment lovers and investors, but also a second home for many fi lled with fantastic art, architecture, food, music, cars of them. and intelligent people, many fi nd it diffi cult to return to reality. Collectors are fl own in to stay at Mikael’s villa so Timeless is outstanding for its tight relationships with they can experience living with art, proof of the man’s artists and lovers of exquisite art. It is a place where exceptional business mind and artistic sensibility. This one can experience the beautiful, the rare and the is how luxury is defi ned by TGG – the artistic should be valuable in one space and feel part of one, big family. experienced in every single element of our lives. This is a venue where business is conducted smoothly and without pressure and where clients can make Timeless Gallery Group gained its reputation by investment decisions while being treated like members providing top quality support for its artists, regular of the family. feedback to its clients, amazing ROI results for its investors and an unconditional passion for art, both The luxurious side of art appreciation as a pleasure and as a profession. This ultimately has The galleries off er a luxurious experience, not only via led to the Timeless Gallery expansion, a constantly valuable art pieces, but also by paying the strictest increasing client interest generating the opening of

9 FAMILY OFFICE ELITE MAGAZINE the two new showrooms – one in Marbella and one in of fi ne art markets is complex, TGG allows those with or Miami. Many artists have already expressed an interest without inside knowledge to reap substantial benefi ts. in being showcased in these state-of-the-art venues. The collection is constantly increasing and, although Finally, apart from a potential increase in value, art the gallery specialises in exclusive artworks, there is provides these additional fi nancial benefi ts: a range for every taste and budget. If you love art and want to enjoy it, TGG will off er you the best, no matter • Art provides a hedge against infl ation and currency what. This is another reason that TGG keeps expanding devaluation. around the world. • There is little risk of losing your principal if you purchase from Timeless Gallery Group. The investments of passion • No minimum investment is required. Not many realise that art is a valuable asset; already, • Art investments enjoy favourable tax treatment. TGG has built a serious portfolio of investors. This is • Reduction of risk because of low correlation with augmented by strong artist support from TGG founder other fi nancial assets. Joanna, the overseeing of all aesthetic, technical, legal • Possibility of earning extra revenue by lending out the and economic aspects, the High Net Worth Individuals work or of participating in events such as exhibitions (HNWI) network and impeccable artistic taste. These and meetings of experts. generate new assets daily for clients and investors. • Art has no geographical risk and can be moved easily. • Art can easily be insured. The Segerstroms predict that the proportion of all luxury spending on art will continue to increase as investors The TGG team can use art to make your properties look seek assets that will retain their value in the longer more sophisticated, increase your asset’s sustainability term, especially in a period of economic uncertainty. and advise you on building a collection. You will be Finally, there is a growing recognition of art as an surprised by the Timeless result. investment asset class by TGG investors. People have become more sophisticated in their fi nancial and estate Art is Timeless planning and have begun seriously to view art as an The Art raises the ethos, sophisticates and stimulates investment. Some take a more in-depth and measured creativity and innovation. Experiencing Art is approach to portfolio management and are willing to experiencing the beauty of nature – it makes a man consider diversifi cation strategies that encompass better. Thanks to Art, feelings, imagination and ability to more exotic investment classes, such as art and other the most personal reactions are awakened. It is the way collectible assets. of discovering one’s personality. That is why Timeless Gallery Group wants to create an ambience where the Last but not least, the current socio-economic context most beautiful pieces of art can be found to inspire, creates a demand for ‘real assets’, because many to touch and to allow experiencing their wonderful, serious investors lost money in the fi nancial crisis by spiritual light through diversity. Timeless Galleries investing in products they did not understand, and are is home to artists and audience and where they meet turning back to things that are closer to their heart and without needless words. The nest of an aesthetic oasis, which, at the same time, off er protection and a solid as well as an inspiring and developing community, return on investment. because as Cicero once said, ’The Art is the philosophy of life’. With fi nancial markets still in fl ux, some HNWIs indicated they are approaching their ‘passion’ investments as Timeless Gallery Group is and has been working eagerly investor-collectors, seeking out those items that are throughout these many years to create a serene working perceived to have a tangible long-term value, which is environment and promote a magical scenery full of art, exactly what TGG provides. However, as the operation beauty and passion.

10 WWW.FAMILYOFFICEELITE.COM ROLLS ROYCE

“Black Badge is an attitude to life, an aspectfi ant, ofthe the risk Rolls- takers and Royce brand that appeals to those people who are elusive and de BLACK BADGE disruptors who break the rules and laugh in the face of convention”

11 FAMILY OFFICE ELITE MAGAZINE 12 WWW.FAMILYOFFICEELITE.COM ROLLS-ROYCE AN ALTER-EGO FOR A NEW BREED OF CUSTOMER BLACK BADGE The substantive transformation of an icon FAMILY OFFICE ELITE MAGAZINE SPECIAL

Sir Malcolm Campbell, Howard Hughes, Keith Moon, Yves Saint Laurent, Muhammad Ali and our own Charles Rolls to name a few. Torsten Müller-Ötvös, Chief Young gentlemen in a hurry, driven by their restless spirits to change Executive Offi cer Rolls- the world in their own way. Untrammelled by social convention, these Royce Motor Cars disruptors lived life on the edge, believing the ultimate power to be self- empowerment, pushing every boundary to realise their personal vision. “Black Badge is an attitude Glamorous and daring, they lived fast, worked hard and played hard. to life, an aspect of the Rolls- Royce brand that appeals to Today’s generation of young, self-empowered, self-confi dent rule- those people who are elusive breakers are just as uncompromising and unapologetic in their choice of and defi ant, the risk takers living and lifestyle as their predecessors. They follow the road less travelled, and disruptors who break the live the unconventional life, darkly obsessed by their own pursuits rules and laugh in the face of and accomplishments from which they derive a pure adrenaline rush. convention. They are driven by a restless spirit. They Their life is their entertainment, and they live it on their own terms. play hard, and they change the world.Technically and And when the day is done, and the battle is won, these aesthetically Black Badge is supremely confi dent people engage with the night, they go the alter ego of Rolls-Royce, where it leads, and take all it has to off er as their just reward. darker, more assertive, more confi dent and powerful, and As demanding in their lifestyle as they are in theirheir life pursuits, these more demanding. With Black highly-driven people insist on great substance fromom any symbol of theireir Badge, we have created lifestyle. More and more, such individuals wish to demonstratemonstrate theirthe successuccess the most commanding through a symbiosis between their life’s work andd their chosench en brands. presence on the super- luxury landscape. It is a truly Over the last years, many such individuals have gravitated transformative moment for towards the revitalised Rolls-Royce Motor Cars as the brand our great brand.” most appropriate to encapsulate their truly diff erent lifestyles,estyles, much as their celebrated predecessors did in days past.past

Always pushing their own boundaries, they have askedked Rolls-Royce Motor Cars to do the same. Excited by the infi nite possibilitiesities that its Bespoke approach off ers, they have asked the marque “to produceuce a Rolls-Royce like

13 FAMILY OFFICE ELITE MAGAZINE Rolls-Royce Black Badge speaks to the darker, more assertive, confi dent and demanding aesthetic of these customers. no other, a Rolls-Royce that not only appeals to, and projects, our sensibilities, but is fundamentally diff erent – like us.”

And, always ready to deliver a truly Bespoke answer to meet the customer’s desire, Rolls-Royce Motor Cars has once again demonstrated its true luxury credentials as the world’s leading super-luxury brand. Rolls-Royce has transformed the very icons of its brand to access a darker side of its character more suited to this breed of successful people.

Rolls-Royce Black Badge speaks to the darker, more assertive, confi dent and demanding aesthetic of these customers. As a truly Bespoke response to their desires, the interplay of brand and customer has had a transformative eff ect on the appearance and substance of Rolls-Royce Ghost and Wraith. The result is Ghost Black Badge and Wraith Black Badge.

Together with the Parthenon Grille, the famous Double R logo and the Spirit of Ecstasy are the very embodiment of the Rolls-Royce brand. However, these treasured symbols of the marque have been willing to change their identity in appropriate circumstances before.

In Ghost Black Badge it is important to ensure rear compartment passengers’ comfort by maintaining Rolls-Royce’s renowned ‘Magic Carpet Ride’. Rolls-Royce engineers used the fl exibility of the 6.6 litre V12 engine to make Ghost Black Badge a little more menacing. Subtle engine output modifi cations see power increase by 40hp (30kw) to 603hp (450kw) and torque by 60Nm (840Nm) compared to current Ghost, whilst upgrades “Black Badge was a to the 8-speed automatic transmission give Ghost Black Badge an added sense of urgency in how it delivers its power. fascinating challenge for Rolls-Royce’s engineers.”

14 WWW.FAMILYOFFICEELITE.COM THE NEXT TECHNOLOGY GOLD RUSH BIO-PRINTING BIOPRINTING BODY PARTS FOR TRANSPLANTS

Bioprinting involves the use of advanced printing technology to print live cells for use as human organs for transplants; the cells then seem to be able to rearrange themselves after printing.

The 3D printing industry has come a long way in the last few years and has for some time been printing a diverse selection of objects in areas such as automotive, medical, business, industrial equipment, education, architecture, consumer products, plastic and metal items. However, while this seems like an incredible achievement, even more incredible is the recent development of bioprinters. This technology that can construct living tissue by outputting layer-after-layer of living cells will revolutionize the medical fi eld. 3D printed prosthetics and implants have already been on the market for a number of years. Recently in the news, the fi rst customized 3D-printed lower jaw was created for an 83-year-old patient with a serious jaw infection. The FDA has also given approval for a 3D printed implant that replaced 75% of a man’s skull.

Future developments include keyhole bioprinters that can repair organs inside a patient’s body during an operation; other developments have cosmetic applications such as face printers that could evaporate existing cells while simultaneously replacing them with new cells. Future technology could also give people the ability to download a face template from the Internet and have it printed onto their own face or have a saved template of their own younger face and have it reprinted back on, later on in life. As bioprinting interacts more and more with the medical fraternity, replacement body parts and organs will be a relatively simple and routine task. In addition, as every organ printed will be from a patient’s own cells, the risk of transplant organ rejection would be negligible.

According to Christopher Barnatt, the Associate Professor of Strategy and Future Studies at Nottingham University Business School in the UK, ‘I believe that bioprinting will become a mass-use medical technology, largely because it will be readily scalable, unlike current transplant techniques that are limited by donor tissue availability. I expect bioprinting to enter an application in the early 2020s for things like nerve and arterial graft transplants. Kidneys will probably follow by the late 2020s, and more complex organs, plus in situ bioprinting in the 2030s.

• REPRINT DAMAGED BODY PARTS AND SKIN • REPRINT YOUR YOUNGER FACE AT ANY AGE • POSSIBILITIES FOR MEDICINE ARE ENDLESS

15 FAMILY OFFICE ELITE MAGAZINE PRINTING A NEW FACE

“Bioprinted images created by and copyright (c) Christopher Barnatt, ExplainingTheFuture.com”

16 WWW.FAMILYOFFICEELITE.COM VIDEO VIDEO PRESENTATION AWARD WINNING COMPANY A professionally designed video Video adverts are designed and ADVERTS presentation for you company or created by an international team services to host online or in FOE. of award-winning producers.

Video Advertising

We can all identify with that age old saying social media is going to be hit or miss unless “One picture is worth a thousand words”. you are paying a social media expert, who knows who, what, why, where and when to So what is a Video Promo,? Its simply Video target an audience. However, this is not easy advertising that uses online or offl ine within the Family Offi ce Sector. This is a sector interactive media to communicate with a that like to remain private, however, we have target audience to promote a brand or service seen some service providers attempting to reach out and off er their services to family These come in many shapes and sizes such offi ces by buying one of the notorious lists as the video promo on the facing page. Video of Family Offi ces that are fl oating around the promos are now an essential marketing tool internet. We believe that any list that is for to showcase a business’s service, corporate sale to “all and sundry” is nothing more than profi le, philanthropic project or political a spam list. This is a sure fi re way to alienate announcement. A Video promo can be used your business as opposed to promoting it. We in a promotional material and PDF’s and all know that the vast majority of such email included in your companies website or used will hit the junk folder automatically. as a TV advert. It goes without saying, if you need to get the word out about your business Some other service providers attend dozens then your brand needs to be recognized and of Family Offi ce expos and conferences in every way possible and in every medium around the world each year in an attempt to available. try and meet the desired connections within this sector. This is worth considering, but you In today’s modern world advertising is still will have to attend a lot of these events to get much the same as in days gone by. Yes, we now to know which events are full of people just have social media and visual mediums such as like you, trying to sell their services or events TV, Radio, and the Internet. But incorporating where family offi ce principals attend. video adverts into a company’s marketing strategy like the one on the facing page has That said, the cost of attending these events many benefi ts to a business.(click on the link may be quite substantial if you attend a to view it online) few. With fees for Expo entry, promotional material, fl ights, hotels and expenses this While advertising for some, is done on the can add up quickly and may not produce the cheap via online social media platforms, desired results you may be searching for. others go the full distance. That said, without While many things have changed over the the proper training or the required budget, years, advertising is still much the same, the

17 FAMILY OFFICE ELITE MAGAZINE YOUR COMPANY MESSAGE INTERACTIVE TRAINING VIDEO Create a dedicated message to new Create a training video that will and old clients about your business or save hundreds of hours hiring services in a professional way. training staff .

“One picture is worth a thousand words”

Click on the image above to view the promotional video from DOMOS Fine Art only thing that has changed is the technology. have to move with the times if we are to remain Many publications now have both online and competitive. Advertising is the lifeblood of any offl ine issues with the online taking over in the business. When advertising a business or service past few years. Some publications have stopped in a publication, make sure you advertise with a putting our hard copies entirely as the online publication that has the type of reach you need version is reaching the same audience. Some to get your business noticed in the sector you publications now have the facility to incorporate are targeting. This publication has nestled rather video presentations and advertising into their snuggly into a niche position within this sector, publications. that being the Family Offi ce sector.

Video presentations have proven to be very If you would like to learn more about advertising eff ective as they can be utilized within a or a video promo advert, view our media kit website, within a promotional pdf, TV, and on online or drop us an email all computers and handheld devices. The visual www.ourmediakit.co.uk medium is just getting bigger all the time, and we e-mail info@familyoffi ceelite.com

18 WWW.FAMILYOFFICEELITE.COM THE RETURN OF BRITISH POLO DAY 400 guests and VIPs British Polo Day returned this Amr Zedan, Dr & Mrs Steven Emirates Palace and tradi- March for the fi rst of its 2016 and Gillie Lamprell, Princess tional Majilis by kind invita- events. Both Abu Dhabi and Alexandra Cantacuzene and tion of HH Sheikh Nahyan bin Dubai played host to some Marc De Panafi eu came to- Mubarak al Nahyan. Making 400 guests and VIPs includ- gether to celebrate the best their way through the city- ing Sheikh Mohammed bin of UAE and British tradition. scape to the modern oasis Khalifa Al Maktoum, Sheikha Taking in the very best the that is the Shangri-La Dubai, Maitha bint Mohammed Arabian Peninsula has to off er, guests enjoyed an even- bin Rashid Al Maktoum, HH guests embarked on an excit- ing with Jaeger-LeCoultre to Sheikh Saeed Al Maktoum, ing itinerary which included celebrate the 85th Anniver- Mr Mohammed Al Habtoor, an authentic dinner at Byblos sary of an icon – the Reverso Ms Pooya Ahmadi, Mr Hos- Sur Mer with traditional Royal timepiece - at the Dubai Polo sam Alsaady, Mr Amr Zedan, Salute 21-year-old Quaich ex- & Equestrian Club, a Taylor Dr & Mrs Hitesh and Minal perience, cricket match which Morris Volleyball tournament Bodani, Hossam Alsaady, Mr saw Eton play Harrow at the at Cove Beach Club and a Presented by RJI Capital, an international merchant banking fi rm...

19 FAMILY OFFICE ELITE MAGAZINE game of camel polo for The Thesiger Trophy. The Hackett Rest of World Team won decisively 4-1 against the Inter- continental UAE team in a light-hearted game of Bromp- ton bicycle polo; a sport played in the Olympics over 100 years ago. The highlight exhibition polo match of the evening – The British Polo Day Plate – saw the home team RJI Capital Ghantoot Polo Team play the visiting Royal Salute British Exiles. Following an offi cial prize-giving ceremony, guests sat down to a delicious three-course dinner followed by a live charity auction raising a total of $46,000 for Women And Health Alliance International (WAHA) launched by Her Highness Sheikha Shamsa bint Hamdan Al-Nahyan and Ending Domestic Violence, a UK based charity under the patronage of Baroness Scotland of Asthal, dedicated to fi nding eff ective ways to end do- mestic violence worldwide. Guests bid fi ercely for lots including a stay on ultra-exclusive Velaa Private Island, a safari of a lifetime to Kenya with The Safari Collection, a special cigar dinner at Franco’s in London and a luxurious retreat to Royal Mansour Marrakech.

On Friday 25th March – the eve of the world-famous Dubai World Cup – British Polo Day Dubai brought a touch of quintessential British equine heritage to the Emirate under the patronage of Mohammed Al Habtoor, the Vice- Chairman and CEO of the Al Habtoor Group at The Dubai Polo & Equestrian Club. Once again, the opening match saw Execu-Jet Guards beat British Silverware Cavalry 1-0 in the camel polo. Swapping camels for pedals, Hackett Rest of World beat Taylor Morris UAE 3-0 in Brompton bicycle polo. These preceded the two highly-anticipated vintage Global Partnership Family Offi ces Desert Safari polo matches between RJI Capital Oxbridge and Shangri- which took guests through the rolling sand dunes whilst La Dubai Gulf Polo and – following which – Royal Salute also taking part in activities such as falconry. Rounding British Exiles versus home side: Bentley Habtoor Polo. off the action-packed itinerary that had something for all the senses, Harrods also hosted an exclusive fragrance As is fi tting for such a glamorous Dubai setting, the day’s dinner presented by renowned perfumer Roja Dove al- polo drew to a close with an offi cial prize-giving cere- lowing special guests a sneak peek into the new Black mony and after-party. Commenting on British Polo Day Tier Fragrance launching this summer. On Saturday 19th UAE Tom Hudson, Co-Founder of British Polo Day, com- March, British Polo Day Abu Dhabi took place at Ghantoot mented: “This is now our 7th year in the UAE, and we are Racing & Polo Club, the private royal polo ground of HH very grateful for all the support we have received from Sheikh Falah bin Zayed Al-Nahyan. The glamorous black- our hosts and all our partners. Polo in the UAE is going tie evening kicked off with two rather unusual takes on from strength to strength and we are proud to have been the traditional game of polo – with the Bentley Cavalry part of that journey.” team beating the Etihad British Army Guards 4-1 in a

Photo credit Sam Churchill

20 WWW.SATOCONSULTANTS.COM IMPACT INVESTING IN THE FAMILY OFFICE FIVE STEPS TO START By Suzanne Hammer – Hammer & Associates

Impact investing is an investing approach that investments with their values, produce competitive intentionally seeks to create both fi nancial return as returns, and make a signifi cant impact on a local and/or well as positive, social and/or environmental return — global scale. and one that is actively measured. According to Peter Caff erkey of Boncerto Ltd.: ‘For a Across the globe, people are looking to put their assets number of families, there is a wish to have a larger to work on the world’s problems while retaining their scale impact on social issues which are just too large wealth and legacy for the long-term. For this reason, for them to address purely through their philanthropy. impact investing is attracting individuals, institutions, Through impact investing, families can put more of their foundations and family offi ces the world over. resources to work with the aim of gaining social change. It enables them to recycle funds invested to enable a Whereas traditionally investors have kept their fi nancial more long-term social impact, and also bring more of goals and resources separate from their philanthropy, their investment skills and analysis to the investment.’ impact investing off ers an opportunity to give money Deals in this space, he said, can be innovative and and make money. Individuals and families can align their exciting—adding to the attraction.

21 FAMILY OFFICE ELITE MAGAZINE Some investors focus only on projects, not impact 1. Decide why impact investing is for you. Write a list of investing funds. According to Tatiana Alexandra what matters to you individually and as a family. Where Ward of Rex Clement Capital in Hong Kong, ‘It’s much is there overlap with other family members? Rule out harder to fi nd suitable, diligence worthy projects, but whether exclusive investment or philanthropy would the families I work with appreciate the more tangible be more appropriate or eff ective. Why or why not? impact of owning a real asset — be that a wind farm, a hydro plant or a training facility in rural Africa.’ 2. Engage an advisor. An advisor specializing in impact investing can be brought in before, during or after the Impact investing as a trend is in its early days, and it narrowing process of what to focus on and why. When can be a complicated marketplace. There are barriers identifying an advisor, take your time. Rely on personal to entry, among them, the defi nition. According to recommendations and a comparison of fee structure, Lisa Parker, vice president of philanthropic services at type of opportunities in which sector, region, size of the Whittier Trust Company, ‘The term itself means diff erent organization, etc. things to diff erent people. Some view it as avoiding ‘sin stocks’ and investing in companies with positive ESG 3. Do your research. If a particular social issue is scores (Environmental, Social, Governance). Others see motivating you, research that issue (or engage others it as investing in much diff erent terms — for example, to do so for you) so that you understand the social funding social ventures in developing countries. Some element and the gaps in that marketplace. By building expect market returns; others are not looking for your knowledge of the social challenge, you will be signifi cant returns but simply want their investable better able to identify opportunities for the largest funds to work towards their mission alongside their social impact in that area. charitable contributions. There are cases where impact investing is returning as much as, if not more than, 4. Engage with others. If fi nancial innovation and traditional market investing, so it is not as straight- potential returns are your primary motivation, look to forward as one might think.’ engage with other investors, understand the common challenges and talk with others who are already Beyond fi nding a common defi nition of impact investing, involved in impact investing. other challenges include: fi nding opportunities, which can be rare, and how to go about measuring 5. Learn by doing. Make a small number of initial social returns, which can be a long and expensive investments in areas of interest and view them as process. Finding projects that match a family’s cultural learning opportunities. Within impact investing, many preferences can add even more complexities. individuals have become involved by initially putting to one side a small part of their philanthropic portfolio While the challenges to impact investing are real, they to experiment with funds for which they have little are not insurmountable. Most philanthropic families expectations of returns. focus on traditional philanthropy fi rst and dabble in impact investing on the side. ‘The families we work with To learn more about impact investing in family offi ces, aren’t saying ‘let’s pull our philanthropy and do impact read the report Philanthropy in the Family Offi ce: A investing,’ said Caff erkey. ‘Rather, they see impact Global Perspective, June 2015, produced by Hammer investing as a way to leverage more resources for the & Associates and the Global Family Offi ce Community. social good, and make their philanthropic money work Download the report at www.suzannehammer.com. harder.’ About Hammer & Associates Family offi ces can play an important role in bringing Hammer & Associates is a full-service fi rm that works scale to the impact-investing sector in the coming years. with a select number of family philanthropies. We The most successful impact investments are those in form deep, long-term relationships with foundations, which the family is fully engaged — not necessarily family offi ces, and the advisors who serve them, from a time perspective, but from the actual project/ helping philanthropic individuals and families pair investment perspective. For family offi ces exploring their passion. the possibility of getting involved in impact investing, here are fi ve steps to start:

22 WWW.FAMILYOFFICEELITE.COM REAL ESTATE KEY TO SECOND CITIZENSHIP For High Net-Worth Investors

Nuri Katz is President at Apex Capital Partners, a leading international advisory fi rm specializing in investment consulting and wealth management for multinational, high net-worth clientele.

According to recent data, there are more than 211,000 ultra-high-net-worth investors (UHNWI) globally, with a combined net worth of nearly $30 trillion, a 6% increase from 2013. Experts are predicting that this number will grow by another $10 trillion by 2020. As this investor base continues to expand, many individuals realize the need to provide security and wealth protection for their families, as well as diversify their assets, particularly given the state of today’s global economic climate and the increasing geopolitical instability worldwide. Nuri Katz Apex Capital Partners Recognizing the investment opportunities around the world, one emerging trend among the ultra- investing in an entity or instrument issued by the wealthy has been citizenship-by-investment, which government, such as a bond or promissory note; provides UHNWI and their families the opportunity to and, contributing to a government development become legal residents or citizens of a new country fund. of their choice, through investment in real estate or government programs. With more and more affl uent Of the three options available, the most common investors seeking out ways to invest in second fi nancially sound approach to dual citizenship citizenship, especially in the real estate sector, fi nancial by UHWNI is through real estate. These types of advisors who work with these wealthy individuals and investment opportunities are mutually benefi cial their families should understand the intricacies of how to both the investor and the participating this process works and the benefi ts and challenges country – helping to create jobs and stimulate associated with this opportunity. the local economy through the injection of direct investments from foreign investors, while also Obtaining Second Citizenship Through Real Estate allowing the investor to gain lawful and permanent Investments access to a more fi nancially desirable region or country. In the past fi ve years, the number of citizenship-by- investment programs has more than doubled. These Right now, there are approximately twenty nations programs vary from country to country, but they typically that off er citizenship or residency programs, with fall into one of three categories: investing in private most countries located in Europe, North America or sector assets, such as real estate or a business venture;

23 FAMILY OFFICE ELITE MAGAZINE the Caribbean. The benefi ts and minimum investment citizenship. Challenges Associated with Obtaining requirements vary tremendously depending on the Citizenship By Investment Ultimately, there is a participating country. The least expensive country to great variety of citizenship by investment programs off er second citizenship is Dominica, a small island in available to UHNWI, with the choices that vary based the Caribbean that requires a minimum investment on available capital, desired location and the length of $100,000, plus $1,800 in fi ling fees. of time required to obtain residence or citizenship. There are, of course, diff erent challenges associated Grenada reinstituted its residency program in 2013 with each individual country’s program, which and UHNWI can now immediately become a citizen fi nancial advisors should understand in order to for a minimum investment of $350,000 in real educate and advise their clients. estate within the country. This program requires that the government individually vet applicants and American UHNWI have additional issues to overcome their family members, though it typically only takes in order to benefi t from gaining a second citizenship. about 60 days for applications to be processed, with The most common hurdle is the fi nancial obstacles passports issued shortly thereafter. that result from the Foreign Account Tax Compliance Act (FATCA), which took eff ect in July 2014. It requires St. Kitts and Nevis established their citizenship-by- banks worldwide to report to the U.S. authorities the investment program in 1984, making it the longest accounts held by Americans abroad, meaning that standing second citizenship program in the world. U.S. citizens must continue to pay U.S. tax regardless It allows investments in pre-approved real estate of where they reside. With approximately eight to be purchased for a minimum investment of million Americans living abroad, many have reported $400,000. Antigua and Barbuda, which is home to problems with applications for and maintenance the most active and prestigious yachting industry in of accounts locally as foreign banks have rejected the Caribbean, can also be an option for a minimum American customers rather than comply with the investment of $400,000. exhaustive demands of FATCA.

For more luxurious real estate off erings, UHNWI This has presented a challenge for Americans living can look to countries like Cyprus or Malta, where or doing business overseas that, according to recent second citizenship can be purchased for a minimum data from the U.S. Treasury, 1,335 expats renounced investment of about $1.2 million. These programs their U.S. citizenship in the fi rst three months of last off er full access to the EU and is one of the least year. Moreover, almost 75% of expats say at least one restrictive passports available for global travelers. part of their fi nances has become more complicated In Spain, the minimum investment is $700,000, living abroad, whether that concerns new currencies, while countries such as Portugal have a Golden Visa taxes or moving money abroad. Program that off ers non-EU investors a fast track to obtaining a valid residency permit. Despite these obstacles, UHNWI’s are continuing to seek out second citizenship investment In Cyprus, UHNWI can choose to invest €5 million opportunities around the world. They are looking to in either state bonds, local real estate and other their advisors to understand the challenges, as well developments, or local businesses. Alternatively, as the diff erent minimum investment requirements investors can purchase a €2.5m stake in a collective required by each country, in order to weigh up investment opportunity, providing the total value the various government programs and real estate of the plan is at least €12.5m. Applicants also need developments available worldwide in order to fi nd to buy a Cypriot residential property for at least the right opportunity that best meets their needs. €500,000 and maintain this after being granted

24 WWW.FAMILYOFFICEELITE.COM OPPORTUNITIES FOR PRIVATE BANKING AND FAMILY OFFICE BUSINESS IN AFRICA ING LuxembourgRGBy Yves Ducaté Private Banker ING Bank Since the fi nancial crisis of 2008, the global banking environment as well as client behavior have changed signifi cantly.

FATCA, CRS, BEPS and, in general, the willingness of states to combat tax fraud eff ectively have transformed the banking landscape and have, in particular, lead to the tightening of client eligibility criteria by fi nancial institutions.

Bankers have been empowered in their relationship with their clients, and if some inconsistencies were revealed by a KYC (Know Your Customer) check (for example during a relationship review), the client was required to rectify the situation.

Moreover many countries have set up “special” procedures or have legislated in order to permit Yves Ducaté clients who failed to report income, to regularize ING Bank their situation. participating countries of the OECD program. Some emerging countries understood the opportunities The enhancement of bank’s due diligence of this new environment, such as Morocco and Ivory requirements are felt most strongly in fi nancial Coast which have created the legal conditions (in centers actively operating internationally, such 2014 and 2016, respectively) to enable as Switzerland, London and the Grand Duchy of any person being a resident in these countries to Luxembourg, resulting for some clients in a lot of regularize their situation and thus breathe new life diffi culties when collecting the documentation into their economy and add a certain modernity. requested by their fi nancial intermediary. In Morocco, the “Contribution in Full Discharge of Additionally, some clients residing in non- foreign assets” law helped bail out the State to the participating countries of the future CRS (Standard tune of more than € 250 million but has mostly for Automatic Exchange of Financial Account helped to inject new capital into the economy Information by OECD) were also surprised by their andthereby boost investments in the country. From an banker’s premature requirement to provide the individual perspective, this law has however created same documents justifying the compliance of a real earthquake in wealthy Moroccans’ habits who, their tax aff airs as those required from residents of accustomed to the highest level of discretion, found

25 FAMILY OFFICE ELITE MAGAZINE themselves after regularization in an unprecedented on the lookout for businesses on the continent that situation: having to manage international patrimony are going to experience the greatest growth in the in a fully open and transparent manner. 21st century, it is often during the due diligence that the operation fails either because the African This new situation has created some surprises. Many entrepreneur is poorly structured or because it is Moroccans were faced with new and often structured through a SPV (special purpose vehicle) complex situations, such as: derived from tax havens that are blacklisted in most · Taking assets out, previously owned through a Western states. company, even off shore, could generate a tax cost in the foreign country but also in Morocco. Yet these families are often in need of advice and However the “Contribution in Full Discharge” support in order to prepare their company to cross doesn’t exempt future taxes such as capital gains, borders. These groups have the fi nancial means to liquidation proceeds or others. expand but often ignore the tools available to be · Holding foreign patrimony can necessitate the optimally structured, which is needed when becoming requirement to meet certain reporting a multinational company. obligations in the country where the assets were located and may have tax implications such The same is true regarding the private wealth of as wealth or inheritance tax. these families. Because of a lack of alternatives, a big · Foreign succession rules that may apply in some portion of their personal assets is often included in cases on the transfer of assets located the structure of the company. They neither have an abroad may be in contradiction with the wishes of the overall view on it, nor a detailed or a structured one deceased and/or with the Moroccan and they often ignore its importance and profi le. law. · Depending on the nature of the assets, reporting The new global transparency rules are an opportunity rules for the Moroccan authorities could for these families and businesses to “clean” and be diffi cult to achieve. structure their assets, which is the only solution if · In many cases, the risk profi le of the client’s portfolio they wish to continue their international expansion was not aligned with the client’s and deal with partners who are very rigorous on new expectations and management fees were higher than global rules. the average levels. But it is also an opportunity for Private Bankers and In short, new situations that required expertise Family Offi ces to invest in these African countries hitherto non-existent in Morocco: i.e. international where everything has to be done, at the dawn of a wealth engineering. Unfortunately, these visionary century that looks exceptional in terms of growth for governments in search of modernity are still too rare this continent, cradle of Modern Man. in Africa, the ultimate emerging continent, where it is often diffi cult for an African resident entrepreneur to Yves Ducaté engage with an international bank. Private Banker African Markets Large international law fi rms or Corporate Finance and M&A (merging & acquisition) specialists realize this every day. Although some African businesses, often family ones, which by their activity, size or location are potential targets of Private Equity funds

26 WWW.FAMILYOFFICEELITE.COM CHIVAS LIVE WITH CHIVALRY YOUR PASSPORT TO INTERNATIONAL STYLE AND LUXURY

Craftsmanship, generosity and a Trotter limited edition gift tin, a a vibrant tale of international passion for travel are at the heart limited run of Chivas 12 ‘Made for travel. Inspired by the tradition of the new collaboration between Gentlemen’ by Globe-Trotter 20 of applying stickers onto one’s British luxury brands Chivas Regal inch Carry-on Cases and a Chivas luggage to proudly showcase and Globe-Trotter. Renowned for 12 ‘Made for Gentlemen’ by destinations visited, bespoke handcrafting luxury suitcases and Globe-Trotter Steamer Trunk. luggage stickers were hand-drawn leather goods, Globe-Trotter has by the British illustrator Andrew partnered with Chivas to design an The Chivas 12 ‘Made for Davidson to celebrate iconic cities exciting series of three collectibles Gentlemen’ by Globe-Trotter and adorn the contemporary tin for the whisky connoisseur and limited edition gift tin houses design. world traveller - the Chivas 12 a bottle of Chivas 12 blended ‘Made for Gentlemen’ by Globe- Scotch whisky and showcases A fi rst from Globe-Trotter, the

INTRODUCING CHIVAS 12 ‘MADE FOR GENTLEMEN’ BY GLOBE-TROTTER...

27 FAMILY OFFICE ELITE by Globe-Trotter Steamer Trunk is an original design that will see proceeds of its sale donated to charity The Prince’s Trust. It includes a beautifully crafted mini bar with mirrored back for serving Chivas Regal Scotch whisky. American white oak trimmed drawers have been handmade to honour the oak casks essential to Chivas Regal 12YO’s rich complexity and a hand engraved copper plaque made from a retired Scotch whisky still assures its authenticity.

To be displayed from 5th October in Globe-Trotter’s fl agship store in Albemarle Street, London, the one- off Chivas 12 Made for Gentlemen by Globe-Trotter Steamer Trunk for The Prince’s Trust will retail at £12,000.

For further information: www.chivas.com

Chivas 12 ‘Made for Gentlemen’ Carry-On Case is a 20 inch trolley case that has been crafted to suit the needs of the busy modern gentleman on short haul business trips and city breaks. It can be stowed in the fl ight cabin of all international airlines and features a customised lining that elegantly intertwines a never-seen-before Globe-Trotter archive design with the Chivas iconic signifi er. The sturdy, burgundy, vulcanised fi breboard case also features wooden handles, brushed brass hardware and an internal leather plaque to mark the collaboration for posterity.

To showcase the true craftsmanship of Chivas Regal and Globe-Trotter the Chivas 12 Made for Gentlemen

28 WWW.FAMILYOFFICEELITE.COM US Congress Enacts Entirely New Tax Examination and Collection Regime for Partnerships and LLCs

Caplin & DrysdaleGBy By Charles M. Ruchelman In recent years, the U.S. Internal Revenue Service (“IRS”) and U.S. Congress recognized two important divergent trends. While the use of pass-through entities, such as partnerships and limited liability companies (“LLC”), as business and profi t-seeking structures, was growing, the number of IRS examinations of these entities was staying stagnant. According to the IRS’s own statistics, the percentage of partnership and LLCs that were examined each year for the past decade was less than one-half of one percent. In 2015, the IRS examined only .51% of the partnership and LLC tax returns that were fi led. In comparison, in 2015, the IRS examined over 11% of all large corporate tax returns that were fi led.

The IRS and the Congress appear to have laid the blame for the low examination rate, and related lost Charles M. Ruchelman tax revenue, to the complex procedures set forth Caplin & Drysdale in the 1982 partnership examination laws, known as “TEFRA,” the statute that originally enacted IRS with respect to the tax examination, litigation, the unifi ed partnership examination provisions and collection process. The Act repealed the (“TEFRA stands for the “Tax Equity and Fiscal “TEFRA” partnership regime and replaced it with an Responsibility Act of 1982”). The inconsistent judicial entirely new set of rules. While the new regime has interpretations of the TEFRA partnership rules, as well similarities to TEFRA, there are signifi cant changes as the agency’s slow-moving enforcement and actual that will now require careful review and revisions to implementation, demonstrated that these rules were certain tax provisions of partnership agreements. In not appropriate for the changing partnership and LLC light of the new legislation, partnerships and partners landscape. Accordingly, Congress made an important should now evaluate the current provisions of their change in the law that all persons with partnership or partnership agreements and make fundamental LLC interests should be aware of. changes to the tax procedure provisions.

Certain provisions of the Bipartisan Budget Act of Generally, the Act substantially changed (1) the ability 2015 (the “Act”) made fundamental changes to of the IRS to collect an underpayment of tax, penalty, the rules by which partnerships, and entities that and interest from the partnership itself, (2) current elect to be treated as partnerships for tax purposes partners’ exposure to tax liabilities of prior partners, (e.g. limited liability companies), interact with the and (3) the powers entrusted in the partnership’s

29 FAMILY OFFICE ELITE MAGAZINE designated liaison with the IRS (formerly known as the at the highest tax rate for the reviewed year. This “tax matters partner”). Also, Congress provided the change in the law may require parties to consider or Treasury Department with broad regulatory authority review indemnifi cation provisions in the partnership to implement the goals of the statutory revisions. agreement. Therefore, partnerships should pay attention to the issuance of new Treasury regulations in the coming III. Ways to Modify or Avoid Tax Collection at months. Partnership Level: The “imputed underpayment” collection process can be avoided or modifi ed in one Some of the statutory revisions that aff ect typical of three ways. partnership agreements are as follows: I. New Tax Terms and Concepts: The new regime 1. Elect Out on Timely Filed Return: First, if a repeals well-known TEFRA terms (e.g., “t“tax matters partnership has no more than 100 partners and no partner”) and creates completelyy new legal termsterm partner is itself a partnershiptnership (or an entity that has and concepts including “partnershipip representative,” electedelect to be treatedreate as a partnership, like a limited “imputed underpayment,” “reviewedewed year,” and liability company),mpany), thent n the partnership can make ana “adjustment year.” To synchronizeze with the new annualannu “opt-out” electionele on on a timely fi led tax return. Code requirements, these termsms and concepts ToT preserve this option,o on, a partnership agreement should be incorporated into partnershiprship agreements.agreements could be amended tot limitmit the number of partners to Reviewing and revising the partnershiprship agreemagreementsts 100 and to restrict the ability of other partnerships now will allow for an orderly processcess if anand when to join the partnershippartnersh as a partner. If a partnership the IRS examines a partnership tax return,retur makes tax elects out of the nenew regime, the partnership and adjustments, and/or requires payments of additional partners will be examinedexam ed under the rules applicable tax, penalties, and/or interest. Furthermore,urthermore, to individual taxpayers.taxpaye revisions to the partnership agreementsents will prprovidede clarifi cation of the rights and obligationsligations of the 2. “Reviewed Year” Partnerartner Pays Tax WiWith Current partnership and the partners. Year IndividualIndiv ual Return:Retu Second, withinwith 45 days of receiving a notice of fi nal partnepartnership adjustment, II. Tax Underpayments To Be Collected from any partnership,pa regardlessess of size, may elect out of Partnership: As under TEFRA, taxax adjustments the “imputed underpayment” process so long as it will continue to be made at the partnershiprtnership level. provides the IRS with “a statement of each partner’s However, unlike under TEFRA, unlesss a partnershpartnership share of any adjustment to income, gain, loss, is eligible to make an annual electionon and does,do in deduction, or credit (as determined in the notice of fact, make the election, the tax attributableributa to an fi nal partnership adjustment).” Under this procedure, adjustment, and related interest and penalties, will “reviewed year” partners calculate their share of be collected, subject to certain possible adjustments, additional tax due based on the statement described at the partnership level. above (i.e., like an amended Schedule K-1) and the “reviewed year” partners will pay the additional When the IRS makes a tax adjustment, the amount with their respective current year individual partnership’s current partners (the “adjustment year” tax returns. An election under this provision, however, partners) will eff ectively pay the tax for the partners increases the applicable underpayment interest rate who were in place in the tax year for which the by two percentage points. The new statute requires adjustment was made (the “reviewed year” partners). fast action by the partnership (i.e., 45 days) to perform The tax to be paid is based on another new concept, computations and send the proper notices. Therefore, a calculation called the “imputed underpayment.” a procedure should be put in place to accomplish this Generally, the imputed underpayment is calculated procedural route.

30 WWW.FAMILYOFFICEELITE.COM 3. Modify “Imputed Underpayment” Where to settle a case or extend the statute of limitations Reviewed Year Partner Files Amended Reviewed without approval from the other partners. This Year Tax Return: Third, a partnership can reduce new statutory regime obviates the need of the IRS the amount of the “imputed underpayment” if one to “chase down” each and every partner to sign a or more of the “reviewed year” partners fi les an Form 870-PT (Agreement for Partnership Items and amended return and paysays the tax atattributable to the Partnership Level Determinations as to Penalties, adjustmentadjust allocablecabl too that partner. To implementim Additions to Tax, and Additional Amounts) or sign a this, the partnershiptnership mustust submit information to the Form 906 (Closing Agreement On Final Determination IRS suffi cient to modifymodi the “imputed underpayment” CoverinCovering Specifi c Matters) in order to implement amounta ount within 270 daysys of the notice of proposed an examinationexamination’s adjustments or a settlement. For adjustment. VerifyingVerifyin that an amended tax return present purpospurposes, partnership agreements should has been fi led by a reviewedeviewed year partner may be revised tto refl ect this new, critical designation. If raise certain privacy concerns.ncerns. A partnership thus there is no partnership designated representative, may wish to establishestabli a method that allows for the Code gives the IRS the authority to designate the implementation ofo this alternative, rather than one. Certainly, partnerships and partners do not undergo the “imputed underpayment”nderpayment” procedure. want to relinquish that selection right to the IRS.

IV.IV Powerful New Partnershipartnership RepresRepresentative: These new rules apply to partnership tax years The Code nowow manmandatestes that the partnership beginning after December 31, 2017. However, a designates a “partnershipp representative”represe instead partnership may elect to have the new rules apply of a “tax matters partner.”rtner. The “partnership to partnership tax years beginning after the date representative”rep will “have sole authority to act on of enactment and before January 1, 2018. Given behalf of the partnership” and the “partnership the many new legal terms and concepts, and the and all partners shall be bound by actions taken … potentially signifi cant shift of the benefi ts and by the partnership.” Interestingly, this controlling burdens of post-adjustment tax items, existing entity need not be a partner in the partnership. partnerships and partners should review and modify Furthermore, the new rule signifi cantly curtails the their partnership agreements. New partnership ability of other partners to participate in an IRS agreements should accommodate the new examination or litigation with the IRS. Therefore, partnership tax audit and collection regime. partnership agreements may need to be adjusted to provide contract rights to other partners that once Charles M. Ruchelman is a Member of Caplin & existed as a statutory matter under TEFRA. For Drysdale, a Washington, D.C.-based law fi rm. example, a partnership might consider whether the [email protected] / 202.862.7834 Partnership Representative has unbridled power

31 FAMILY OFFICE ELITE MAGAZINE                   

  

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BURGESS SILVER FAST At 77 metres (252.6ft), SILVER FAST is the world’s largest and fastest aluminium motor yacht with conventional propulsion. Her distinctive styling, with a sleek, streamlined hull and metallic silver livery was designed by Espen Øino. She is the fourth and most advanced vessel in the multiple award-winning Silver Series, whose DNA is based on high calibre all-aluminium superyachts with fast, fuel-effi cient credentials and long range cruising capabilities.

SILVER FAST’s remarkable performance was demonstrated last year on her 3,200 nautical mile maiden voyage from Perth, Western Australia to Sri Lanka, which she completed at an average speed of 17 knots with fuel consumption of only 400 litres per hour (106 US gallons per hour). Delivering a range of 4,500 nautical miles at 18 knots, her powerful MTU engines can carry her to a top speed of 27 knots in optimum conditions, and her long-range cruising speed is 20 to 22 knots. Proven for long ocean passages in all sea states, her slender hull cuts through the waves with ease, and she is quiet and vibration-free for night-time passages at 18 to 20 knots. Quantum zero-speed stabilisers keep her equally comfortable at anchor. Her shallow draft of 2.6 metres (8.5 feet) makes her perfect for cruising the shoal waters of the Gulf, the Maldives, the South Pacifi c and the Bahamas. SILVER FAST’s airy, the contemporary interior was conceived by Andreas Holnburger of Vain Interiors to be both fresh and luxurious. Teak paneling and grey glass mirrors are complemented by innumerable custom fi nishes such as metallic painted walls with leather steps on the central stairwell. Weight reduction is

33 FAMILY OFFICE ELITE MAGAZINE achieved by the use of lightweight aircraft honeycomb construction. The main deck features panoramic views from large picture windows and leads aft to the ‘theatre room’ with huge plasma cinema screen. From there you can head out into the ‘winter garden’ – a fantastic glass-screened, air conditioned space that allows for fl exible indoor/ outdoor dining whatever the weather. Wraparound sliding glass doors shield from wind and rain without detracting from the view, while the mirrored ceiling adds light to the dining area below which can seat up to 20 guests. The aft deck itself features comfortable raised lounge seating and a top-of-the-range fully integrated 70,000 watt sound system.

The spacious sea level ‘beach club’ on SILVER FAST has been expanded to allow for more gym equipment in the comprehensive spa facility with customized sauna, hot steam room, massage room and beauty salon. On the sun deck, the mirrored bar front converts into a TV to allow movies to be viewed from the glass-fronted eight-person Jacuzzi.The innovative tender stowage area is accessed via forward gull wing doors and houses two 7.4m (24.2ft) all-weather custom tenders. On the foredeck, the “touch and go” helipad is suitable for an AgustaWestland AW109 or a Eurocopter EC135.

This ground-breaking superyacht is a real head-turner and off ers speed, effi ciency and stylish luxury in equal measure. - www.burgessyachts.com

34 WWW.FAMILYOFFICEELITE.COM & H D O OUR LATEST ARTICLE ON ANTIQUE WEAPONS

N L

A L

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LONDON A FROM FAMOUS LONDON GUNMAKER

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O D

H A Tradition of Style, Adventure and Exclusivity..

EXPLORE THE WORLD OF ANTIQUE WEAPONS HOLLAND & HOLLAND EVER THOUGHT OF INVESTING IN ANTIQUE WEAPONS? Learn what the expert gunmakers have to say!

Holland & Holland guns are and highly regarded London gun to delve into is classic sporting celecelebrated throughout the world as and rifl e makers. Taken forward by shotguns and rifl es. It is generally the perfect combinationco of artistry his nephew, Henry,He who became a recognised that the epitome and and craftsmanship. To understand partnerp ner in 1867 (from thent on the benchmark of excellent sporting why, you need simply pick one up, companyco pany was known as Holland & guns and rifl es that are produced balance it in your hands, andd allow Holland),H and), the company built a gun in thet UK, so this is where our your eyes to take in everye ery detail of factoryfa ry in Kensal Green in 1898 search beginsbegins. We must fi rst take ititss linlines.es. whichw h has since been in continuous into considerationconsiderati that condition is use.us key. AlthoughAlthoug you may pay a little Such an achievementchievement does not more for something unique, totally comcome into being by evolution To considernsider an antique or vintage original,origi unaltered and in excellent alone,ne, even though Holland & weaponswe ons as an investment may not condition, you will not normally Hollandland guns and rifl es trace their be as daft as it would fi rst seem.seem not have a problem selling it lineage bbackk to the year 1835. Its Like alll collectables, fashions comec on. When looking for a good other parent is curcuriosity,ty, the desire and goo so not everything is going investment, one likely to make of the craftsman and gunmgunmakerrto to to beb desirable all thet time. The reasonable return in the years to see whether an improvement can one certaintyrtainty is that, if carefully come, the sound advice would be made on accepted mmethods. purchased,sed, valuesva never appear to to be to fi rst look for something The company was ffounded by go down but generally increase on with fairly standard specifi cations. Harris Holland in LLondon in 1835 a regular basis of around 3 - 5% per By doing this it means that when and by the turn of the 19th century year. There are many specifi c areas you come to sell you will appeal had becomebecom one of the best known of the market, but the most popular to a wider market, rather than

35 FAMILY OFFICE ELITE MAGAZINE CONSIDERATIONS 1. Condition

2. Best gunmakers

3. Purchase price/future value

4. Enjoyment factor just a few collectors. A second consideration should perhaps be the name. Holland & Holland, Boss and Purdey will always command a higher price as the original standard of workmanship is higher than the majority. However, a poor condition best gun or rifl e will not hold or increase its value anything like one in mint condition of a lesser make. Your third consideration must be what as an individual, are you looking to achieve? If it’s just pure investment then it’s down to condition, originality and purchase price, but to enjoy and make use of the guns and rifl es whilst you own them, to me, is a bonus.

A great number of owners use these collectables week after week but take care to maintain their condition. We must remember that although considered ‘antiques’ these are working guns that were made to be shot. It is not uncommon what others are showing interest having a bespoke gun made to for someone to turn up to a shoot in. When looking at shotguns, a your measurements cannot be with their one-hundred year old hammerless sidelock is popular, bettered. If it’s old you decide Holland & Holland still in perfect but if you want a rifl e, the big on every maker at various times working order. So where should calibre’s are in demand. ‘New or through time purports to be we look to start with all this? Are Old?’ A very common question better than the next. The major you a rifl e or a shotgun man? Do indeed and something that splits advantage of buying old as an you have a passion for old rather opinion, with some suggesting investment is that you can see an than new? Maybe you like them ‘they don’t make them like they immediate return if you paid the all. Decide what would benefi t you used to.’ The plus side of buying right price. Remember to keep the the most by looking what you can new is that the quality of today’s following in mind, and you will not use and enjoy, decide how much materials, manufacturing and go far wrong: 1.Condition, 2. Best you wish to invest and then look craftsmanship is as high as it ever gunmakers, 3. Purchase price and on the internet, at auction sites has been. The standard perceived future value and 4. Enjoyment and in the shooting press to see gets better year after year and factor now.

36 WWW.SATOCONSULTANTS.COM INVESTING IN FINE ART Fine Art SPV: Buy and Hold – VS – Buy and Loan

Therefore, there are little running costs, no salaries, no huge commissions and there can be attractive tax incentives dependent on where the SPV is located.

The Buy and Hold SPV – This is a rather simple process and is predominantly utilized by the hard-core investor as a vehicle to park funds for a long-term period. The art that is owned by the Buy and Hold SPV can be stored at a Free Port or another location, home or offi ce until the investor then decides to sell. Although this is horrifying prospect to most fi ne art connoisseurs (individuals who reputedly have the With the current instability in the world markets, more ability to tell almost instinctively who painted a and more Investors are paying attention to fi ne art as picture), to your hardcore investor, it’s just business. an asset class. Of course, one of the primary factors in this sector, like any other, is conducting thorough due We asked one art investor recently how he felt about diligence on any art that may be under consideration. the connoisseurs’ aversion to this ‘Buy and Hold’

process; he replied ‘when the connoisseur saves up One of the fi rst issues in this process would be to enough money, just like I have, then he can come back ensure that the provenance and condition of fi ne art and buy the art from me. Until then, I’ll have if safely must be right. If there is even the slightest of doubt put away for them. as to the validity of the provenance of any fi ne art, no matter how attractive the painting looks, the obvious Buy to Loan – This is another option for investors to conclusion is to pass on it. There are many other consider, as investing in quality fi ne art and loaning issues in relation to fi ne art that need to be addressed it out to a reputable museum has some unique as part of the due diligence processes; these may advantages. include taxes, export licensing, forensic examination and so on. This strategy also falls under the remit of Family Offi ces, as investing in quality fi ne art, is in essence, That said, investing in off -market Fine Art has a preserving the wealth for the next generation. This number of interesting advantages over traditional may have a number of advantages, namely the asset classes, as it is now proving to be a very low costs associated with loaning it to established attractive option for the wealthy. One way of museums, this would be dependent on the terms and achieving this is via a fi ne art SPV (Special Purpose conditions of any loan agreement. Vehicle) An SPV can be set up in most jurisdictions and in a number of diff erent ways, dependant on the Should you need more information about acquiring client’s requirements. However, from an investor’s fi ne art then please use the contact details below. perspective, the SPV should be owned entirely by the Investors. DOMOS Fine Art

37 FAMILY OFFICE ELITE MAGAZINE

PULSE CINEMAS Pushing the Boundaries of Home Cinema Style

From its humble beginnings in the late Seventies, a rack of Datasat processors and power amps; all home movie viewing has come a long way. Not just driven by a Kaleidescape movie server?” with advances in audio and visual technology but also with comfort and design. Even the ‘home’ is The solution here, he explains is the super no longer a restriction; you’ll see many a lavish covetable fl ex cinema set up, where a living space private cinema on board yachts, in penthouse has a dual function and some serious wow-factor suites or beside swimming pools. “, at fi rst, glance your beautiful living room off ers nothing more than a low-level Japanese dining Since 2003, Pulse Cinemas have become the go-to table; cushions scattered around the fl oor and consultants in the home cinema landscape. Pulse lighting that focuses the guests’ attention on the supply inspiration and technical know-how in order gorgeous meal that has been served... Then, at to push the boundaries in home cinema comfort, a touch of a button, like something from a Bond sound and visual quality for their elite client base. movie, your beautiful living space becomes an In Pulse’s book, there are no restrictions. Anything amazing cinema... Your Lutron lights dim, the is possible; ideas are without limit. Home cinemas blinds silently fall from a slither in the ceiling, are an interior design feature, and no detail is the hidden Runco projector and Screen drops into overlooked. place and suddenly the generous Kaleidescape off ering of the latest blockbuster movies, in full Use of space is important, Pulse CEO Mike Beatty HD quality, appears on screen for your guests to insists “, there’s not a more fascinating experience choose from.” than spending the evening with friends and family watching the latest blockbuster movie on your the Of course, whatever room the cinema is in, big screen within your very own dedicated cinema. acoustics play a key role in the perfect set But what if space doesn’t allow for rows of Fortress up “Cinema Acoustics off er a whole range of Cinema chairs and a dedicated Screen Research acoustic panel treatments to improve the audio screen, a projector shining from a darkened ceiling, performance of a room,” explains Andy Jones,

39 FAMILYFAMILY OFFICE ELITELITEE MAGAZINMAGAZINEE Sales Director at Pulse “, by using a combination server system.” The newly available Encore of absorption, diff usion and bass control these product line allows movies to be purchased, panels dramatically improve the listening backed up and saved to a cloud – then watched experience, increase immersion and reduce in 4K Ultra HD at any time. For the luxury cinema listener fatigue. These acoustic panels are made environment, it seems, anything else would be to order and can be customised with the clients’ inferior. “It’s the only choice for clients looking own artwork or images, giving a completely for their cinema at home to recreate what the bespoke solution. We have seen movie posters, director intended…” family photos, artwork or even suede fi nishes complete the room.” With prices for a bespoke home, cinema beginning at around 15K (and going up to Sitting pretty? Pulse Cinemas insist that over £million) another trend Pulse are quick to the performance and quality of the seating highlight is that they are no longer the bastion should match that of the technical equipment of the single male. Mike Beatty emphasises “, and work closely with Californian company On the contrary, 95% of our dealers’ customers Fortress to create stylish seating, right down are couples, choosing the cinema for the family to the detail of the stitching. Whether your to enjoy. Home cinema is defi nitely no longer penchant is for fringed red velvet reminiscent perceived as Dad’s toy; our business is to create of a vintage theatre seat to a sleek leather fi nish beautiful cinema designs, and this includes monogrammed with studs, Fortress chairs can choosing fabric for chairs, bespoke colour- be created to diff ering back heights, reclining to schemes… It is a family decision. People often the angle of the customers’ choice. think home cinema is just for watching fi lms, but they are awesome for watching music events or Another component that Pulse fully endorse is even playing console games.” the Kaleidescape system, which they describe as “THE high-performance movie and music www.pulsecinemas.com

40 WWW.FAMILYOFFICEELITE.COM SHOWCASING THE AMAZING 1066 PIANOS

TRUSTED SUPPLIER OF THE WORLDS FINEST PIANOS FOR MORE THAN THREE GENERATIONS

Now in its third generation, even designed to be truly exceptional. In combine their many years of sound today 1066 Pianos remains a the 1066 Workshops irreplaceable, expertise with the application family-run business with a vision time-proven experience combines of scientifi c principles to truly to carry forward its tradition, with computer-aided design exceptional eff ect. craftsmanship and exceptional (CAD) to dramatic eff ect. True technical knowledge from our craftsmanship meets state-of-the- Exquisitely tailored. Cambridge workshops based in art design processes, and fi nely- As with a bespoke tailored suit, England.With more than 10,000 honed cutting edges meet the your piano should be a ‘perfect square feet of space devoted very latest in laser technology. fi t’ for you — and you alone. It to the line of work, The 1066 In brief: the wealth of our great should proverbially fuse with your Pianos Workshops are among piano heritage combines with 21st fi ngers, becoming a part of you. the few largest still in existence. century innovation to produce the Responding with fi ne alacrity to Nowhere else in the world will very fi nest pianos in the world. your every whim. Likewise, the you fi nd such a unique variety piano should be able to express of fi ne, handcrafted pianos. Finely attuned to perform. you — through the roar of thunder, Furthering our commitment to Our master technicians fulfi l the or a light expression of joy and quality, all work is carried out original designer’s vision with their laughter — the piano should at our family workshops by our outstanding ability, experience express your thoughts precisely as Cambridge artisans, technicians and technical knowledge that you want them heard. and craftsmen. enable the impressive dynamic response for which a 1066 piano This is what is so uniquely special Engineered to be exceptional. has become internationally about a 1066 piano. It is made From initial concept through to renowned. They are the magicians especially for you. their execution, a 1066 piano is of the 1066 Workshops, who www.1066pianos.com

41 FAMILY OFFICE ELITE MAGAZINE A BESPOKE PIANO How would you like your piano to look

Whether you want a magnifi cent period fi nely tuned art case piece or a bespoke designer ” form” by 1066 to per- piano, The 1066 Grand Hall we have an outstanding selection of instruments to choose from.

You can discuss your personal piano requirements. One of their experts will be delighted to talk through the options with you, whereabouts in your home it ”engineered to betional” excep- will go, which size is ideal etc., and guide you further along the path towards your perfect piano.

1066 also specialise in ‘sculpture pianos,’ amazing sculptures with a fi ne handcrafted acoustic piano inside each one individually designed and bespoke to be exactly as the client wants it.

A BESPOKE PIANO AS YOU WANT IT

42 WWW.SATOCONSULTANTS.COM 43 FAMILY OFFICE ELITE MAGAZINE The Bernie Madoff Ponzi Scheme WHISTELBLOWER FRANK CASEY At least 339 hedge funds feeding victims from over 40 countries to Madoff .

Bernard Madoff was born on April wrong but because it went against that his fund had invested more 29, 1938, in Queens, New York. their ex-military offi cers’ creed of than $300 million with a manager He used $5,000 earned from “Duty, Honour and Country.” few people even knew was in this a lifeguarding job to found his business. This manager demanded investment company. Madoff ’s Had the SEC been paying attention complete privacy, so much so that built up his fi rm and before his to Casey and the team, investors anyone who admitted they have incarceration, his estimated net would not have suff ered $Billions invested with him risked having worth is $17 billion. He is the in losses. Casey said, “If this fraud all their money returned – but former non-executive chairman grew large enough, it would bring his economic performance was of the NASDAQ stock market and down the U.S. fi nancial system and astonishing. the mind behind the largest Ponzi the credibility of our regulatory scheme in history. system.” Regulators at the SEC, Unbelievable, month after who were mostly attorneys, could month, no matter how the market THE WHISTLEBLOWER never grasp or understand the performed, he made money using Frank Casey is a former US Airborne fraud. The fraud succeeded not what is known as a split-strike Ranger Infantry Captain with only because of the SEC’s but also conversion; Madoff generated 39-years expertise in Corporate because a number of banks and 1% on the total investment per Risk Management, Alternative wealth-managers were wilfully month like clockwork! Casey fi nally Investments-Hedge Funds, Private blind, this in understandable as learned the name of the manager, Equity, Business Development and there were making money from Bernie Madoff . The same Bernie Due Diligence. Frank Casey stresses Madoff ’s feeder funds. While there Madoff whose brokerage fi rm transparency, liquidity, client are many victims of Bernie Madoff ’s bearing his name is a well-known control, and never compromising fraudulent activity, but there is market-maker and founder and the absolute honesty in every another interesting story to this former Chairman of NASDAQ, one of representation and execution. case, that of a small and secretive the most respected, even beloved, group, who became known as “The men on Wall Street. The Madoff case began thirteen Fox Hounds.” For almost a decade, years ago when Frank Casey and the Fox Hounds fought with the SEC Madoff was also running one of Harry Markopolos knew that to bring down Madoff , supplying it the largest and arguably most returns reported by investment with a mountain of evidence that successful money management manager and broker Madoff proved beyond doubt that Madoff fi rms in the world. Casey is were fraudulent. They set about was running his Ponzi scheme. impressed, but de la Villehuchet documenting a case against Madoff leads him to believe that if Rampart using math and mosaic intelligence. Frank Casey, a Fox Hound member, can devise a similar strategy, it They warned the SEC about Madoff then an options specialist working could get a portion of Access’ $300 over and over again in the 8.5- at a fi rm named Rampart, was million investment. Casey returned year period. Submission and after trying to convince pension funds to Rampart with fi nancial data submission fell on deaf ears, and to invest in a Rampart structured outlining Madoff ’s strategy and 29-Red Flags ignored. Through fi nancial product wrapping hedge showed it to Harry Markopolos, a the SEC’s complacency Madoff ’s funds to generate about 12% per Chartered Financial Analyst who Ponzi Scheme was allowed to grow annum. Thierry de la Villehuchet, understood the choreography of tenfold, to over $50 billion. Despite the co-founder and CEO of another numbers. Frank asked Harry to these many setbacks, the group hedge funds specialist fi rm, Access create an investment product that persisted, not only because it was International, explained to Casey could compete with Madoff . Harry

44 WWW.SATOCONSULTANTS.COM took a look at Madoff ’s monthly returns, then looked at Early in 2001 Mike Ocrant an investigative reporter Madoff ’s investment strategy, within fi ve minutes he for the respected hedge fund journal Mar Hedge said, “This is a fraud. Maybe even a Ponzi scheme.” And became the fourth member of this group and began then it took him an additional four hours to prove that working on a story about Madoff ’s secret investment Madoff was a complete fraud. fund. He couldn’t believe what he found. Eventually, he called Madoff and requested an interview. Madoff As the team gathers more information about Madoff , shocked him by suggesting he come right over to the they realize there are only two possible ways Madoff offi ce. He found Madoff to be charming and direct, he could be so successful: He was front running, meaning answered every question, and Ocrant left his offi ce he was using information from his brokerage operation believing there had to be some mistake. Eventually to illegally manipulate the market or secondly, he was his story about Madoff ’s secret investment fund and running possibly the largest Ponzi scheme in history. the questions that couldn’t be answered – ran in a Most people who knew Bernie Madoff would never Wall Street trade newspaper. It should have destroyed have considered that Bernard Madoff , a fi nancial genius, Madoff –but no one even blinked. A week later, a much a humanitarian, a man who contributed millions to more widely circulated Barron’s picked up the story. charity, could be a crook of epic proportions. In addition to Frank Casey, Harry drew into the chase his protégé, The team was certain this was the end of Madoff . The the equally intense Neil Chelo, a young member of articles raised too many questions and should have several of the most prestigious fi nancial organizations, brought down his empire. However, no one paid any who sat directly across the desk from him at Rampart. attention to them. It was becoming clear that Bernie The three colleagues began by gathering as much was too big to be brought down. information about Madoff ’s operation as possible. The Fox Hounds began collecting as much information The numbers continued to get bigger and bigger: as possible about Madoff ’s money management Seven-billion, Ten-billion. Incredibly, Bernie Madoff business. Madoff had warned his investors not to talk was secretly running the largest hedge fund on Wall about the fund. For good reason, Harry had discovered: Street. His business was completely unregulated. Initially, Harry believed Madoff was either front running or engaged in a Ponzi scheme, but leaning toward the latter theory. Neil and Frank weren’t so sure, believing he was front-running order fl ow. After all, who would believe such a highly respected professional of Wall Street would be running a Ponzi scheme. Finally, in May of 2000, the Team put together their fi rst submission to the SEC, a document outlining the reasons Madoff couldn’t possibly be legitimate. Among the twelve red fl ags listed that were in order to be following this investment strategy Madoff would need to have access to about $7 billion in options – and he was supposedly trading his options on the Chicago Board of Options exchange -- which had less than $1 billion options available. Madoff had up to Seven billion of investors’ money in the strategy, and he was growing larger by the day.

Whistleblower Frank Casey

45 FAMILY OFFICE ELITE MAGAZINE MADOFF GUILTY OF 11 FELONY COUNTS sentenced to 150 years in prison.

Madoff was paying them far greater returns than any other fi rm, returns far beyond what might be expected.

In 2002. Harry had fi nally created a product that could generate returns that would rival Madoff – but with much greater risk. Rampart and Access agreed jointly to market the product and Harry went on a sales trip to Europe with Thierry de la Villehuchet. They met with 20 private banks, 14 of them admitted they ‘had’ Madoff , and each of those 14 confi dently explained to Harry that although Madoff was no longer accepting new money, they had a special arrangement with him, and he accepted their money, and only their money.

Later, Frank asked Thierry de la Villehuchet bluntly what he would do when it was proven Madoff was a fraud, In 2009 Bernie Madoff pleaded guilty de la Villehuchet replied that it was impossible, he to 11 felony counts securities fraud and had done his due diligence, but admitted that if he was was sentenced to 150 years in prison wrong then he “was a dead man.” What was astonishing to The Fox Hounds was the immense size of this scam. At the 1999 investigation start, they estimated the fraud to be as much as $5 billion, but what they learned caused them to reassess that fi gure. Way upwards. Madoff ’s tentacles reached deeply into Europe and even South America, and estimates of the fraud continued to grow to $20, then $30 billion dollars. The team was tracking 30 Madoff feeder funds. Only after Madoff surrendered was it revealed there were probably at least 339 hedge funds feeding victims from over 40 countries to Madoff .

During the next few years Harry, with the assistance of his team, made four more submissions to the SEC, eventually there would be a total of six, each one of them carefully listing the reasons Bernie Madoff was Charles Ponzi, was an Italian running the largest Ponzi scheme in history. But no businessman and con artist in the U.S. one would listen, and the scam imploded north of $50 and Canada, in the early 1920s he Billion. In 2009, Madoff pleaded guilty to 11-felony promised clients a 50% profi t within 45 counts securities fraud and was sentenced to 150 years days, or 100-% profi t within 90 days, In in prison. reality, Ponzi was paying early investors using the investments of later investors. For More Information see “Scam of the Century” by This type of scheme is now known as a CNBC, Frontline’s “The Madoff Aff air,” “No One Would “Ponzi scheme”. His scheme ran for over Listen” by Harry Markopolos-Wiley Publishing, the a year before it collapsed, costing his “Chasing Madoff ” documentary available “On Demand.” “investors” $20 million.

46 WWW.SATOCONSULTANTS.COM STAMP SOLD FOR $9M-£5.6M

1856 -1cent Magenta $9.M - £5.6M Inverted Jenny below $3 Million

‘Mona Lisa of the stamp world’ INVESTING IN STAMPS

RARE STAMPS COMMANDING HUGH SUMS AT AUCTION Mona Lisa Stamp owned by convicted murderer John du Pont!

The world’s rarest stamp has sold left in circulation. The stamp has in a feature fi lm, ‘Foxcatcher’, which at auction for a record-breaking changed ownership over the years; is set to be released later this year. $9.5 million (£5.6million). The sale a 12-year-old Scottish schoolboy, John du Pont died in prison in makes the extremely rare one-cent Louis Vernon Vaughan originally 2010, aged 72. The proceeds of the postage stamp the most expensive found it in 1973, by, in a bundle of auction for the Magenta Stamp will stamp to ever be sold. The Magenta family paperwork. To him, it was be divided, with 80% going to the stamp measures 1 inch by 11/4 simply a new addition to his own family of du Pont’s wrestling friend inches and it bears the image of collection. Valentin Jordanov Dimitrov. a ship with the former colony of British Guiana’s motto, ‘We give Experts describe it as ‘The Mona Jane Blood, a collector and locator and expect in return’ in Latin. The Lisa of the stamp world’ and it of fi ne and rare stamps said, ‘This image is in black on magenta paper. hasn’t been displayed publicly is one of the very rare times that since 1986. It was later owned such a valuable stamp becomes The postmaster of British Guiana by John du Pont, the heir to the available for auction. This is a created the rare stamp back in du Pont chemical empire, who great long term investment and we 1856 when a shipment of stamps was convicted of murdering the had a number of our own clients was delayed from London. At the Olympic gold medal-winning who were bidding for the stamp at time, it was one of three created wrestler David Schultz in 1997. the much-anticipated auction” and is thought to be the only one Steve Carrell is to portray Du Pont

4747 FAMILY OFFICE ELITE MAGAZINE PHILATELIC INVESTMENT

Investing in rare stamps, as with any other investment, requires a high degree of expertise. Rare stamps are among the most portable of tangible investments; they take up little space but require Treskilling Yellow: U.S.Franklin Z- careful storage as condition is one of the most important factors in determining the value of a stamp. Other tangible investments include art, antiques, precious metals, rare coins and many others that are all termed alternative investments. Interest in stamps as an investment tends to increase when traditional investments are not doing well, causing investors to seek alternatives. The increasing Penny Black: $5M Post Offi ce age of the population in western countries has also been credited with the resurgence in interest in JANE BLOOD Stamp Dealer: Jane blood acts as an agent locating rare stamps says. stamps. Unlike stocks and shares, “you really have to know what you’re doing to be able the majority of transactions in the to buy at right prices and realize a profi t” philatelic or stamp market take place informally.

‘You have to know what perform better than cash in times latest auction has demonstrated you’re doing to be able of high infl ation. As a tangible and illustrates just how good an asset, a stamp cannot go out of investment in stamps or postal to buy at the right prices.’ business like a company quoted history can be. Stamps purchased on the stock market. Most stamps for investment do not normally The market is certainly much are a relatively confi dential have any special regulatory smaller than the fi nancial investment, unless bought at protection for the purchaser. In markets, but it is not trivial a public auction; ownership is the United Kingdom, there is no and has been estimated at £5 private and there is no public regulation of this area at all from billion. Stamps can represent a register as there is for many the Financial Conduct Authority. valuable diversifi cation within a investments in equities. However, where investment is wider portfolio. They are highly collective through a mutual fund, portable stores of wealth and are Interest in stamp investment there may be some regulation easily transported. Stamps are has increased signifi cantly since of the activities of the fund, not a fi nancial asset and so may the sale of the Magenta, as this depending on where it is based.

48 WWW.SATOCONSULTANTS.COMWWW.FAMILYOFFICEELITE.COM PRESERVING AND PROTECTING WEALTH AND REPUTATION

49 FAMILY OFFICE ELITE MAGAZINE SATO Consultants is a global advisory fi rm that provides a comprehensive service to a select clientele. SATO is particularly adept at assessing potential vulnerabilities when dealing with the media or a media crisis. In a fast-moving world of media and entertainment, our clients need immediate results. SATO responds quickly with innovative solutions to evaluate any internal or external threats to our clients that may impact revenues and damage reputations. www.satoconsultants.com

MEDIA CRISIS PLANNING AND POLICIES

It is everyone’s worst nightmare: a POLICY DEVELOPMENT organization and key management, media crisis that has snowballed out Developing an eff ective media crisis which will assist in identifying of control and taken on a life of its policy will assist an organization’s any potential sources of negative own, posing a very real threat to an response to a media crisis. SATO’s publicity. organization’s reputation. A hard- team of experienced consultants earned reputation can be damaged can draw upon sector-specifi c RISK MITIGATION by just one error of judgment that expertise to create an eff ective One can analyse identifi ed risks could cause irreparable damage to media management policy that by reviewing the probability of an organisation or to an individual. will preserve an organization’s negative press or bad publicity What is the answer in such a reputation and address any issues occurring and the resulting situation? that can lead to negative press. consequences such risks can pose to an organisation and therefore MEDIA CRISIS POLICY EVALUATION AND REVIEW plan eff ective damage limitation in The answer may be a media crisis If an organisation is forward- a worst-case-scenario. policy that would have specifi c thinking in its approach to criteria in place to rapidly respond media management and has CONTINGENCY PLANNING to negative media or bad press. a media management policy Robust contingency planning in It is, therefore, critical to have a in place, SATO can conduct a media crisis is paramount for media crisis policy in place, not an annual review, making the an organization to counterpoise only to limit any potential damage necessary improvements and (suggest counteract) negative but to counter any negative media recommendations as required. press. Such planning can provide or press before a problem has time many benefi ts in terms of reducing to escalate. RISK EVALUATION bad publicity and minimising All organizations have an informed any potential damage to an MEDIA MANAGEMENT understanding of risk; it is, organization’s image. Where risks It is also imperative to develop therefore, essential to evaluate an are not addressed, contingencies media management plans and organization’s risks from potential must be put in place instantly to policies by identifying the key negative press or bad publicity. react to a media crisis and limit the strengths and limitations within This evaluation would include impact posed to an organisation by an organization’s infrastructure. a complete review of the entire a hostile press. This will assist in formulating an eff ective strategy that is crucial in ‘Protecting the wealth and the dealing with the press and media or a media crisis. reputation for the next generation’

50 WWW.SATOCONSULTANTS.COM LONDON ON WATER YACHT & BOAT SHOW LONDON YACHT,JET & PRESTIGE CAR SHOW

These exciting events are running with...

PRESTIGE LONDON THE INSIDE TRACK

Located at Old Billingsgate, a 6th May 2016) will display and exclusively showingg visitovisitors the prestigious Thames-side exhibition present companies from around latest yachts launcheded and a wide centre, and at St. Katharine Docks, the world that create the globe’s variety of designs of the future. London’s premier marina village, most exclusive luxury items. more than 120 exhibitors and One of the most eagerlygerly awaited 6,000 visitors attended the fi rst London is arguably one of the most features of the event will London Yacht, Jet & Prestige Car important international market undoubtedly be the supercar and Show in April 2015. for superyacht and luxury yacht prestige car grid. Buildinglding on the builders, being home to more fantastic display of cars at TThe Following this success the show than twice as many billionaires London Yacht, Jet & PrestigePrest e Car has been developed into three very and millionaires than any other Show 2015, this year’s eventent will special events by joining forces city in the world. One of the present several superb carsrs and with ‘Prestige London’, showcasing major attractions of this event is specialist car dealers,s, includingincludin London’s premier luxury goods and the participation of many of the McClaren, Noble, Teslala Mansory services and ‘London on Water’, world’s top superyacht builders: and for the fi rst time Ferrari and an exclusive on-water yacht and Nobiskrug, Lürssen, Blohm + Voss, Lamborghini. Possibly the most boat show located at St Katharine Amels, Abeking and Rasmussen, special car at the event will be the Docks. Designed to appeal to Azimut Benetti, Pendennis ultra-exclusive Ferrari LaFerrari,aFerrari, the those who enjoy the fi ner things Shipyards, Sunrise Yachts, Princess, fastest road-going car everver built by in life, ‘Prestige London’ and ‘The Sunseeker London, Westport the famous Italian brand. Alongside London Yacht, Jet & Prestige Car Yachts, Spirit Yachts, Fincantieri, this, a selection of the world’s totop Show’ held at Old Billingsgate (4- plus many more. Some will be private jet and helicopterer dealersde

51 FAMILY OFFICE ELITE MAGAZINE and charter agents are exhibiting at Old Billingsgate. Leading names such as NetJets, Xclusive Jet and Sikorsky helicopters will be on hand to discuss your airborne travel requirements.

As well as yachts, jets & cars, connoisseurs of luxury goods and services will also be in for a treat. The ‘Prestige London’ element of the show features an exclusive presentation of companies engaged in interior design, luxury furnishings, fi ne art and sculpture, exclusive audio visual technology, fi ne watches, jewellery, objets d’art and fashion. If you are thinking of talks on luxury asset acquisition, & Prestige Car Show, London On- investing in London property come focusing on the three themes of Water (4th-7t May 2016) will and see the experts exhibiting at air, land and sea, will be held from present the UK’s leading marques the show, such as Harrods Estates, 4th – 6th May at Old Billingsgate. of luxury sail and power boats who can advise you where and Created for superyacht owners with several choosing the show when to invest. and high net worth individuals, to premiere new boats for 2016 the seminars will be hosted such as the extraordinary Glider Visitors will also exclusively be by The Superyacht Owner and SS18 and the superb Discovery able to view highly sought after Superyacht Buyer, and organised 58. Britain’s major luxury yachting collectors items from our event by Superyacht Events. brands such as Sunseeker, sponsors Ulysse Nardin and Princess, Fairline and Spirit Yachts Senturionturion With entertainment and The summit will take place over among others, are all supporting cclientnt networking an iimportant three consecutive mornings and and displaying yachts at this event. fafactoror of the inaugural London will focus on the problems and Located just a short walk from YaYacht,t, Jet and Prestige Car Show pitfalls of owning, buying and Old Billingsgate at St Katharine anand Prestige London, the 2016 managing luxluxury assets. Each Docks next to Tower Bridge, this eveventt will display enhanced day will concentratecon on a specifi c wonderful display of yachts and facfacilitiesties to accommodate this. commodity;commod private jets, property boats is rapidly developing its FeFeaturingring a VIP sponsor lounge, and superyachts respectively. place on the calendar as London’s priprivatee meeting and function With a targeted audience of largest and most prestigious On- roorooms,s, plus champagne, seafood industry stakeholders and a Water Yacht & Boat Show. and sushiushi bars overlooking ththe chance to engage with leading RivRiver Thames, Old BillingsgBillingsgate is panelists from the luxury industry Show tickets for all three events the perfectrfect venue to memeet clients, during daily Q&A sessions, the are now available to purchase friefriendss or simply enenjoy a day out event is sure to be an unrivalled online with up to 30% discount shroud in luxury. Designer fashion networking opportunity for off the ‘on-the-door’ price. Visit shows will add even more to anyone involved in the purchasing www.prestigelondon.org (general this unique occasion, with three of luxury assets. ticket price covers access to all evenings of fashion shows planned three events). in association with Fashion TV. In Running along side Prestige partnership with The Superyacht London & The London Yacht, Jet Group, a cutting-edge series of

52 WWW.FAMILYOFFICEELITE.COM T VA s lu p 00 ,0 70 4 €4 ed with s fi i rdd a ua G 0 00 6 MAYBACHS S600 GUARD

The special-protection version of the Mercedes-Maybach is the fi rst vehicle to be certi the highest ballistic protection level VR10 for civilian vehicles.

53 FAMILY OFFICE ELITE MAGAZINE 54 WWW.FAMILYOFFICEELITE.COM WORLDS FIRST PASSENGER CAR WITH HIGHEST LEVEL PROTECTION MAYBACH S600 GUARD The special-protection version of the Mercedes- the Maybach S-Class remains mobile during and after Maybach is the fi rst vehicle to be certifi ed with the an attack and is, therefore, able to exit the danger highest ballistic protection level VR10 for civilian zone. vehicles. These guidelines specify that the bodywork The new Mercedes-Maybach S 600 Guard has been and windows must be able to withstand hardened offi cially certifi ed by the Ballistics Authority in Ulm; steel core bullets fi red from an assault rifl e. When it for the fi rst time, it meets the requirements for VR10 comes to blast protection in accordance with Directive protection rating according to Directive BRV 2009 ERV 2010, too, the Mercedes-Maybach S 600 Guard Version 2 (Bullet Resistant Vehicles). These guidelines leads the luxury class. With the new record, the specify that the bodywork and windows must be able Mercedes-Maybach emphasises its exclusive position to withstand hardened steel core bullets fi red from as a Mercedes-Benz fl agship in terms of occupant an assault rifl e. The vehicle also has an ERV 2010 protection, too. The price of the Mercedes-Maybach S rating (Explosive Resistant Vehicles). The test criteria 600 Guard is €470,000 plus VAT. used to determine this rating are not in the public domain. After inspection by Germany’s Federal Offi ce The Mercedes-Maybach S-Class fuses the perfection of Criminal Investigation, the vehicle was approved of the Mercedes-Benz S-Class with the exclusivity of without any constraints. Maybach. At 5453 mm long and with a wheelbase of 3365 mm, the fl agship of the Mercedes-Benz model The Guard principle: sophisticated integration of all range is 20 cm larger in both dimensions than the protective elements S-Class Saloon with a long wheelbase. Rear passengers The armouring of the Mercedes-Maybach S 600 Guard benefi t from this increased size, as well as from follows the principle of integrated protection based on standard equipment that includes executive seats on many years of Mercedes-Benz experience in building both left and right and other exclusive details such as special-protection vehicles. The key advantages are: innovative voice amplifi cation. • Outstanding strength and stability thanks to specifi c reinforcement of the base structure which is Heads of state and business leaders en route have integrated into the bodyshell production stage. never been as comfortable and simultaneously as well • The high level of comfort is maintained by protected as they are in the new Mercedes-Maybach sophisticated integration and intelligent overlapping S 600 Guard. The armoured version of the Mercedes of all protective elements. fl agship delivers the highest levels of ballistic and Already at the bodyshell stage, protective components blast protection available for non-military vehicles, of special steel are integrated into the cavities between at the same time off ering unsurpassed standards the body structure and the outer skin. Special aramid of spaciousness, ride comfort and luxury on-board and PE components help ensure the protection features. The rear seats have been repositioned off ered by the vehicle. Intelligent overlapping further back, adding to the sense of privacy. systems at particularly critical points, such as material transitions and interstices, Part of the protection concept is that it takes a very provide comprehensive ballistic keen eye to distinguish the armoured version of the protection. Maybach from its series-produced counterpart. A series of special technical features also ensures that The windows are a

55 FAMILY OFFICE ELITE MAGAZINE fi xed and essential part of the protective elements, 2014, was the fi rst vehicle to be fully certifi ed with and particular attention was paid to selecting the the highest ballistic protection level VR9 (according appropriate materials and thicknesses. The windows to BRV 2009, version 2). When it comes to protection are coated with polycarbonate on the inside for against explosives, the S-Class proved its capability splinter protection, and have outstanding visual by fulfi lling the requirements of ERV 2010 (roof, characteristics, despite their laminated structure. fl oor, sides) and Germany’s Federal Offi ce of Criminal Investigation. The interaction between all the components provides the occupants with a highly eff ective protective Experience: Mercedes-Benz has been building space which not only includes ballistic protection, special-protection vehicles for over 85 years. It but also comprehensive protection against explosive started way back with the 1928 Nürburg 460 model devices. In the event of an explosive charge when Daimler-Benz became the fi rst company to detonating at the side of the vehicle, the armouring begin factory-fi tting saloons with special protective protects the occupants as eff ectively as it does in features to shield the occupants from gunshots and an assault with explosives beneath the vehicle: the explosives. Mercedes-Benz also developed specially new underbody armouring, already tried and tested protected variants of subsequent luxury-class and in the S-Class, entirely covers the underbody under prestige vehicles such as the “Grand Mercedes” the occupant compartment, a unique feature in the 770 and the 500 model. Emperor Hirohito of Japan civilian special-protection segment. personally selected an armoured “Grand Mercedes” as his offi cial car. Today the vehicle, delivered in The Guard family: special protection ex-factory 1935, can be seen in the Mercedes-Benz Museum in In addition to the new Mercedes-Maybach S 600, Untertürkheim. the Mercedes-Benz Guard range currently includes S-Class, G-Class and GLE models. With special- Many politicians and heads of state followed the protection vehicles in six model series, Mercedes- emperor’s example and entrusted their safety Benz off ers a more extensive range of special- and security to Mercedes-Benz special-protection protection vehicles than any other manufacturer. vehicles. From 1965 onwards Mercedes-Benz As in the case of series-produced models, the full off ered numerous models with special protection. In manufacturer’s warranty also applies to the models addition to the legendary Mercedes-Benz 600 Saloon in the Guard family. All the Mercedes-Benz service and Pullman Saloon models, in the 1970s and 1980s, outlets worldwide are also able to service, maintain the range included the 280 SEL 3.5 and V8 S-Class or carry out any necessary repairs to the Guard models, the 350 SE/SEL and 450 SE/SEL as well as models. the 380 SE/SEL to 560 SEL. Since 1979, Mercedes- • Mercedes-Benz G 500 Guard: The G 500 Guard is Benz has also been building G-Class models with equipped with a protective systems. 5.5-litre V8 engine and highest protection to VR7 (according to BRV 2009). • Mercedes-Benz GLE Guard: Available as GLE 350 d 4MATIC and as GLE 500 4MATIC. As a special- protection vehicle, the GLE Guard meets all requirements of protection levels VR4 or VR6 (according to BRV 2009) and ERV 2010. • Mercedes-Benz S-Class Guard: Available as an eight-cylinder (long-wheelbase S 500) and as a twelve-cylinder (long-wheelbase S 600). The special- protection version of the new S-Class, presented in

56 WWW.FAMILYOFFICEELITE.COM Jan van Bueren & Th omas Ming

MULTI-FAMILY OFFICE SELECTIONON by Jan van Bueren & Thomas Ming Family offi ces are ‘in fashion.’ A growing number of a relatively small number of peoplele use family offi ces, wealthy families are considering the use of a multi- it is not an easy task for a family too fi nd and select the family offi ce, and an ever-increasing number of most suitable provider. That said, as a family’s wealtwealth companies are starting to off er family offi ce services. and future well-being strongly dependpend on the cchoiceoice of the right provider, the selectionn process shouldould be A family offi ce is a company that supports wealthy taken very seriously. families with the management, organisation and maintenance of their wealth. Although there is no NO TWO MULTI-FAMILY OFFICES ARE THE SAME set minimum, the use of a multi-family offi ce (MFO) Within the MFO universe there is no ‘one sizesi fi ts all’ is mostly considered by families with wealth above solution for every family. Most MFOss off er tailor-made twenty-fi ve million US dollars. As wealth keeps and completely incomparable services.ices. Some of the increasing worldwide, the rise of the family offi ce providers are specialised in philanthropicnthropic or wealth model is a natural development: beyond a certain planning services whilst others focuss more on lifestyle amount of wealth, (fi nancial) needs grow beyond pure management or administrative servicesvices in order to private banking services, and complementing typical improve the family’s quality of life. Thishis diff erent angle banking services with those off ered by MFOs makes is often related to the origin of the family offi ce and sense. Where most (private) banks advertise, are well- the experience/background of its founders; indeed, recognised and have offi ces on the ‘high street’ of whether the founder is a lawyer or a forformer banker cities such as Zurich, London, New York and Singapore, will signifi cantly impact the scope of his/her off ering. most MFOs are defi ned by their discretion. Also, as only Even when MFOs mainly off er asset management

57 FAMILY OFFICE ELITE MAGAZINE services, signifi cant diff erences may occur between the into its fi nancial situation, for example by off ering providers. There can, for example, be a focus on certain consolidated reporting and acting as the central point types of investment, on pure asset allocation or on of contact with banks, or it can act as the coordinator reporting and consolidation services. The type of client of external advisors like trustees, lawyers, tax advisors focused on, the size of the family’s wealth or the region and real estate agents. But it may also specialise in out of which clients are serviced may also vary widely more practical and operational support, coordinating from one provider to another. household staff , acting as a private secretary and making travel arrangements for the family. An additional reason MFOs are so diverse is the fact that, with the exception of the United States and TAKING THE PROCESS SERIOUSLY Luxembourg, they are not regulated in most jurisdictions It is advisable to visit and analyse several providers – even though the asset management component of before choosing an MFO. Which questions to ask when their activities is usually regulated by the fi nancial visiting diff erent providers, what type of MFOs exist supervisory authorities. As MFO services are off ered to and what type of services they off er is important the public without a licensing procedure, the result is a information that can take time to gather. very diff erent off ering with respect to both the actual services provided and the quality of those services. Where the primary motivation for a family in searching for an MFO is that they no longer want to deal with HOW TO SELECT A MULTI-FAMILY OFFICE numerous banks and a large number of (fi nancial) The preservation and protection of wealth are often intermediaries themselves, our experience has shown the main drivers behind the use of family offi ce that families often do not know their own needs that services. This is why the location of the actual offi ce well, or are not aware of what kind of services are should lie at the heart of the selection process. An off ered by diff erent MFOs. They, therefore, struggle MFO should preferably be located in a politically and to fi nd the ‘right fi t,’ i.e. the appropriate MFO that will fi nancially stable jurisdiction such as Switzerland, the off er them the best-suited services. United Kingdom or Luxembourg, in order to safeguard thehe wealth and wellbeing of the family under all As the MFO market is far from transparent and it is circumstances.ircumstances. A family offi ce which is located in the not easy to compare diff erent providers, families homeome country of the family can seem like the right fi t, often start their search by being referred by friends butut might also turn out to be the Achilles’ heel ofo the to the MFO they are using. Here it is often forgotten wholehole set-up at precisely the moment when stability that diff erent families have diff erent goals and needs andnd protection are what the family needs. In practice, for MFO services, and that ‘one size fi ts all’ does not it is this kind of consideration which is often overseen exist in the MFO industry. Also, as for the choice of a or ignored by families, either becausebec they have not private banker, the connection one has with the MFO beenen properly advised or becausebecau they simply consider staff is crucially important, as they become a part of the a set-upet-up in their home countrycoun as being more practical. family’s life and usually remain in place for generations. If only for this reason it is advisable to visit and analyse WHATAT AND WHY? several providers before deciding which MFO provides Apartart from location,lo the type of services sought by the better match. the family (‘what’) is another important factor to take into accounta during the selection process, as most FOSS Family Offi ce Services Switzerland (FOSS), MFOs tend to focus on a specifi c selection of services, is part of the wealth planning services of Union rather than on a wide array of them. As most providers Bancaire Privée, UBP SA in Switzerland. FOSS is cannot be compared in any way, it is also important a web platform developed by Jan van Bueren that the family stakeholders establish which goals they & Thomas Ming specifi cally to support families actually seek to fulfi l by hiring a family offi ce (‘why’). with the selection of a multi-family offi ce. A family offi ce may focus on giving the family insight www.switzerland-family-offi ce.com

58 WWW.SATOCONSULTANTS.COM READ THE LATEST ARTICLE ON LUXURY CHALETS LAVISH FACILITIES SPECIAL PERMISSIONS FOR RE-DISTRIBUTING THIS ARTICLE ARE NEEDED, CONTACT US

The exciting world of skiing...

LUXURY CHALET A SKI AREA OF 600KM

When Ultimate Luxury Chalets spaces. In Courchevel, for example, pristine piste maintenance,ce, a vast fi rst launched in 2005, a luxury the previous ‘top dog’ in terms of ski area, covering approx.x. 600km ski chalet could be classifi ed as size was the vast Chalet Edelweiss of runs, a huge choice of pistes such if the property had fully en- at 3,000m². This season sees the off ering great skiing for alll abilities suite bedrooms. Nowadays, there introduction of the Chalet Apopka, and with plenty of opportunitiesnities for are whole new benchmarks being a chalet that will span 4,000m² beginners and early intermediatesmediates set season after season that now and includes a 26m swimming to learn or to master their parallel provide guests of the most sought pool, an additional indoor/ turns. Couple these ski related after luxury ski resorts in the outdoor swimming pool to the pluses with the fact that thehe ThreeTh e Alps with a whole new level of master bedroom, and a plethora Valleys is now home to 12 Michelinelin sumptuousness. Private swimming of facilities even including a golf starred restaurants, and shoppingopp pools, hot tubs, massage and driving range! Things just got silly!! boutiques in Courchevel off er all wellness centres, and extravagant of the latest ranges from Fendi, home cinemas are now a standard Although some international Gucci, Chanel, Bognor, Monclerler and wish list inclusion of our discerning markets are down in their touristic many more, it is easy to seeee why clients. It seems that in the key visits of resorts such as Courchevel, Courchevel remains the No.. 1 ski resorts of Courchevel, Megeve, Val particularly on the Russian side, destination in many people’ss eyes. d’Isere, Verbier and Zermatt, new there is a new wave of visitors chalets are popping up each year with a huge demand for the resort When discussing the best propertiesperties that simply try to out-do the older coming from the United Arab available to rent in Courchevel,hevel, chalets by off ering more lavish Emirates and South America. The we would, without doubt, havehav facilities and much larger living lure of Courchevel is obvious….. to include the aforementioned

59 FAMILY OFFICE ELITE MAGAZINE Chalet Edelweiss, spread over six levels and with eight luxuriously appointed bedrooms. The chalet has a huge area dedicated to wellness with a 13m pool, hot tub, sauna, Jacuzzi and a superbly equipped gym. For those that like to entertain or simply want to carry on partying after the nightclubs in a resort close their doors for the night, there is even an in-house personal nightclub with DJ booth!

A personal favourite has to be the Chalet White Dream. Immaculately fi nished and white washed, the chalet gives off an aura that encourages you to believe that you and to establish themselves as of Megeve. It spans 1,350m² of are staying in a fairytale chalet, the coolest chalet for clients to living space and sleeps up to 26 tucked away in your own winter be ‘wowed.’ The Chalet No 14 is guests in unrestrained luxury. As wonderland. It’s not the largest or one of the undoubted contenders with all of the top-end chalets the grandest chalet in Courchevel, for this mantle, equipped with 13 the obvious inclusions are the but it off ers a charming location for bedrooms sleeping a total of 26 indoor swimming pool, hot tub, its guests to enjoy a celebration or guests. The chalet is, as standard, steam room, private nightclub and gathering of friends and family in equipped with a 10m indoor pool, cinema. The chalet’s attention to the mountains. a wonderfully cosy cinema, indoor detail is impeccable, and it is most and outdoor hot tubs, and off ering defi nitely one of my top 10 chalets Verbier iss home to somsome stunning a team of 16 dedicated staff who in our ever-expanding collection. skiki chalets,cha ts, with the largest on ththe will wait on the guests and address rental marketarket being the Chalet their eveevery whim. The Chalet Ma Datcha holds a Truff e Blanche,nche, spanning 3,000m². location that is very hard to fi nd The chaletch et has not one, but nine Then comes the choicec of those and impossible to beat in Megeve. treatmtreatment rooms dedicated to looking for a more discreet Being a freestanding chalet pampepamperingg the 18 guests that location, one of the most sleeping up to 14 people in 7 it can occupy. Chalet Truffl e charmincharming and authentic ski resorts bedrooms, the chalet is situated BlancheBlanche’s entertainment on off er in the Alps, where fi ne dining just a short stroll from the centre is so vastva that you will struggle to and boutique shopping are in of Megeve and the central lift comprehendcompre nd fi nding the time to abundance, and with a refi ned station of Rochebrune. The chalet head outou onto the mountain. TheT elegance that captivates its has a picture postcard outdoor chalet featuresf ures a state-of-the-artstate-of-t visitors. We are talking obviously swimming pool with neighbouring privatevate cinema,ema, a sushi and vodka about the resort of Megeve, just hot tub on the vast terrace. Inside, bar, chic privaterivate nightclub,n pool an hours’ transfer from Geneva it oozes sophisticated luxury, yet table, an impressivempre wine cellar airport. with a very traditionally styled and a huge private gymnasium. décor. As Verbier is such a desired Opulence is situated on the corporate destination, over recent legendary Rothschild hillside of For further information years there has been a signifi cant Mont d’Arbois with stunning views Ultimate Luxury Chalets increase in properties set up to of the surrounding mountains T +44 (0) 1202 203650 cater for these company groups

60 WWW.FAMILYOFFICEELITE.COM SAFRA FOUNDATION MAKES DONATION TO CLINATEC Edmond J. Safra Foundation

The Edmond J. Safra Foundation makes a new major donation to Clinatec. The foundation will match each euro donated to Clinatec, up to €5 million, through the end of its eight-month fundraising campaign

Mrs. Lily Safra, Chairwoman of the Edmond J. Safra Foundation, recently announced a major matching grant donation to Clinatec, the pioneering biomedical research center. The Foundation will match every donation given to Clinatec, euro for euro, up to a total of 5 million euros.

The objective is for Clinatec to raise 10 million euros in its fundraising campaign. The matching grant challenge is open to all: philanthropists, corporate sponsors, foundations or individual donors. Proceeds will be used for medical research projects at Clinatec on neurodegenerative diseases, motor disabilities and cancer.

As one of the founding donors of Clinatec, the Edmond J. Safra Foundation’s 5-million euro donation demonstrates its continuing commitment to this leading Mrs. Lily Safra signing the visitors’ book at the research center, co-founded by Professor Alim-Louis Mémorial de la Shoah (the Holocaust Memo- Benabid and Jean Therme, Director of Technological rial) in Paris, with former Minister Simone Veil Research at the CEA (the French Alternative Energies in the background. The Edmond J. Safra Edu- and Atomic Energy Commission). cation Institute at the Mémorial de la Shoah organizes programming for the 30,000 young Clinatec, the Edmond J. Safra Biomedical Research people who visit with their school classes each Center, is a unique research facility utilizing the year, as well as groups of police offi cers, health latest technologies – micro- and nanotechnologies care professionals, army offi cers, and elected and electronics – to treat patients. At the heart of the offi cials. research and development center is a hospital service that includes a surgical unit and laboratories. today: a unique place where research is entirely devoted to patients’ well-being.’ Mrs. Lily Safra The multidisciplinary team comprises more than a commented: ‘Three years have already passed hundred doctors and biologists, as well as scientists from since we had the privilege to inaugurate Clinatec, the CEA, Inserm, the Grenoble Hospital and the Joseph the Edmond J. Safra Biomedical Research Center. In Fourier University, all under the leadership of Professor this short period of time, the Center has reached Benabid. Professor Benabid thanked the Foundation and all of its objectives, and in a remarkable way. I am Mrs. Safra, for their renewed commitment: ‘Once again, delighted to provide renewed support for Clinatec it is a great honour and demonstration of confi dence through this additional €5 million gift. Professor of Mrs. Lily Safra, for our past and upcoming research. Benabid and his colleagues represent hope for You have been part of the Clinatec project from the millions of patients and their families. I know my start. Thanks to you, Clinatec has become what it is husband would have been proud to be associated

61 FAMILY OFFICE ELITE MAGAZINE with their eff orts.’ Professor Benabid’s fi ndings in the Safra Foundation draws continuing inspiration from area of Parkinson’s disease have earned him several its founder’s life and values and supports hundreds prestigious prizes and international recognition, of organizations in over 40 countries around the including the 2014 Lasker-Debakey award. Professor world. Its work encompasses four areas: Education; Benabid has notably initiated the development Science and Medicine; Religion; and Humanitarian of high-frequency deep-brain stimulation of the Assistance, Culture, and Social Welfare. Clinatec – subthalamic nucleus, a surgical technique that The Edmond J. Safra Biomedical Research Center decreases tremors and restores motor functions in teams of medical doctors, biologists, mathematicians, patients with Parkinson’s disease at an advanced engineers and other specialists bring a unique, stage. More than 150,000 people in the world have multi-disciplinary approach to diagnosis and already benefi ted from this treatment. treatment of neurodegenerative diseases cancer and motor disabilities, and development of innovative biomedical devices to improve patient lives. The teams comprise personnel from the Grenoble University Hospital Centre, CEA, Université Joseph Fourier and Inserm.

Clinatec’s current projects include: Adapting a brain-computer interface to an exoskeleton system to provide mobility to quadriplegics. Clinatec teams already have demonstrated the feasibility of controlling equipment attached to the body and connected to the human cortex. This project awaits human trials.

The start of clinical trials for the Near Infrared Radiation (NIR) project, which is investigating the progress of Parkinson’s disease through the neuro- protective eff ect of near infrared light. When applied to the precise spot in the brain where PD and other diseases cause irreversible damage, near-infrared radiation can prevent damage. By protecting the neurons, this process could avoid the gradual degradation of the patient’s faculties and the major disabilities that follow. An intracranial NIR system is Mrs. Lily Safra visits the Edmond and Lily Safra currently under development. Children’s Hospital in Tel Hashomer, outside Tel Aviv, one of the leading children’s hospitals in the The fundraising campaign is led by Alain Mérieux, Middle East. Over the past decade the Edmond and chairman of Institut Merieux, an international Lily Safra Children’s Hospital has developed from medicine and public health concern focused on a small pediatric medical division into a unique diagnostics, immunotherapy and nutrition. ‘Since and well-regarded tertiary medical service, treat- its beginning, the Mérieux Institute has worked on ing children from Israel, the Palestinian Authority, developing biology and innovative medicine that is and throughout the region.” accessible to all. This is an ambition we share with Clinatec, one of the world’s most unique research centers,’ Mérieux said. ‘Together with Clinatec, we are Edmond J. Safra, one of the 20th century’s most taking part in the fi ght against diseases that can aff ect accomplished bankers and a devoted philanthropist, all of us, and by supporting Clinatec, we are joining a established a major philanthropic foundation to great scientifi c, medical and human initiative.’ ensure that needy individuals and organizations would continue to receive his assistance and encouragement for many years to come. Under the www.edmondjsafra.org chairmanship of his beloved wife, Lily, the Edmond J.

62 WWW.FAMILYOFFICEELITE.COM GULFSTREAM MANUFACTURES 100TH G650 HIGH SPEED CRUISE Mach 0.90 / 956km/h RANGE 7,500nm / 13,890 kn/h G650 DATA Gulfstream Aerospace Corp. announced recently that it has PERFORMANCE manufactured the 100th G650. The ultra-long-range business jet was Range - 7,500nm.13,890km delivered to the customer on Nov. 14, 2014. Crusie Speed-Mach 0.85 High Speed Crusie-Mach0.90 “The production of the 100th G650 is a testament to the demand for Takeoff Distance 6,299 feet this incredible aircraft,” said Larry Flynn, president, Gulfstream. “It truly Initial Cruise alt 41,000 ft set a new world standard for performance, range, speed, safety and Max Crusie Alt 51,000 ft comfort when it entered service in December 2012.

WEIGHTS The aircraft was certifi ed by the Federal Aviation Administration on Max Takeoff Weight 103,000lb September 7, 2012, and by the European Aviation Safety Agency on Max Landing Weight 83,500lb December 21, 2012. The aircraft can fl y near the speed of sound, with Max Zero Fuel weight 69,500lb a maximum speed of Mach 0.925. It has a range of 6,000 nautical Basic operating weight 54,000lb miles/11,112 kilometers at Mach 0.90 or 7,000 nm/12,964 km at Mach Max Payload 6,500 lb 0.85. It can connect passengers nonstop from London to Los Angeles Payload & Max fuel 1,800 lb and Beijing to New York. Max Fuel Weight 48,200lb “Since it entered service, the G650 has proven it is a performance ENGINES leader,” said Scott Neal, senior vice president, Worldwide Sales and Two Rolls Royce BR725 A1-12 Marketing, Gulfstream. “The G650 has claimed 42 speed records and secured an around-the-world speed record. It’s more fuel-effi cient than AVIONICS many other aircraft, off ers customers one of the most comfortable cabin

Gulfstream PlaneviewTM II experiences and is equipped with industry-leading safety features.”

TAKEOFF THRUST The G650 has the largest business-jet cabin and provides passengers 16,900 lb with wider seats, more aisle room and the ability to control the cabin entertainment, temperature and lighting with a smart device, such as PASSENGERS an iPhone® or iPod®. The large windows, quiet cabin and low cabin 11 - 18 altitude improve comfort and reduce fatigue. Passengers can work, connect to the Internet or relax before arriving at their destination. The G650 features the PlaneView II cockpit, which includes standard state- of-the-art Enhanced Vision System (EVS) II and the Gulfstream Synthetic

63 FAMILY OFFICE ELITE MAGAZINE GULFSTREAM AEROSPACE G650 Manufacturing Plant

Vision-Primary Flight Display (SV-PFD). EVS provides pilots with real-time images of the aircraft’s surroundings and greatly improves situational awareness in low-visibility conditions. In zero-visibility conditions, pilots can rely on SV-PFD to understand the position of the aircraft in relation to the runway, terrain or obstacles. Gulfstream was the fi rst to implement these safety technologies in business jets.

Gulfstream also recently delivered the fi rst fully outfi tted G650ER business jet to a customer, ahead of the 2015 projected delivery date. Gulfstream announced the G650ER in May of this year. The aircraft received type certifi cation from the U.S. Federal Aviation Administration fi ve months later.

“In today’s fast-paced world, our customers need to travel longer legs at faster speeds,” said Scott Neal, senior vice president, Worldwide Sales and Marketing, Gulfstream. “We are proud to be able to off er a product that meets the needs of our customers. I commend our employees, from engineering to manufacturing, who have worked to develop and design such a superior aircraft.”

The G650ER travels near the speed of sound with a max speed of Mach 0.925. At Mach 0.85, it can carry passengers MAX SPEED MACH 0.925 7,500 nautical miles/13,890 kilometers, and at Mach 0.90, 6,400 nm/11,853 km. It connects more international cities THE G650 ER and off ers more nonstop destinations, from Hong Kong to RANGE 7,500 NAUTICAL MILES New York, and Los Angeles to Melbourne, Australia.

Photographs Copyright GulfStream

64 WWW.FAMILYOFFICEELITE.COM FERRARI’S HOMAGE TO HOLLYWOOD AND BEYOND

To celebrate Enzo Ferrari’s birthday, Hollywood is not limited to its role to include the F430 Schumacher a new exhibition was unveiled at in the fi lms themselves. Many actors voiced in ‘Cars’, completeco with big the Museo Enzo Ferrari in Modena, and actresses are or were devoted cartoon eyes. We also pickedpick the entitled ‘Red Carpet’. As the name Ferrari owners also. Paul Newman, Thomassima,sima, an American-style suggests, the exhibit is a tribute to for instance, even competed a 365 Ferrari sculpted by designer Tom Ferrari’s role on the Silver Screen GTB4 in legendary races such as the Mead onn 250 GT running gear, to and beyond. 24 Hours of Daytona, while Steve symbolisese the many MaranelloMaranel cars McQueen owned a whole slew of that havee appeared on screensc en in This exhibition brings together the Ferraris now much sought-after by disguise, not least in the Fellini- models used on screen with clips of collectors. directed segmentsegme of ‘Histoires them in action in an homage of sorts Extraordinaires’,nair , ‘The Racers’ and to the world of fi lm and television Marilyn Monroe adored Ferraris ‘The Love Bug’.g’. which was so quick to spot their star too – the white 250 GT Cabriolet quality and give them their moment Pininfarina featured in this On a racingg track, movies of the likes in the spotlight: from the famous exhibition was one of her favourites, of ‘Grand Prix’, ‘Le Mans’ and, momore Magnum P.l. 308 GTSs to the Miami in fact. Peter Sellers, Nicholas Cage recently, ‘Rush’Rush’ are the reasons why Vice Testarossa, the 512S used in Le and many other famous faces a contemporaryporary Formula 1 car is Mans and the 375 America driven also fell under the Prancing Horse the symbolol of the event. Because by Sofi a Loren in Boy on a Dolphin. spell. Like any exhibition, this one Ferrari woulduld never have existedexi But Ferrari’s relationship to has taken a little artistic licence without thee track.

65 FAMILY OFFICE ELITE MAGAZINE

REAL ESTATE IN THE FAMILY OFFICE PORTFOLIO How to Add Quality Real Estate to Your Portfolio

DJ Van Keuren is a Director for a Real Estate Family Office based out of Colorado. He has over 25 years of experience in real estate, fi nance, fund management and investing. DJ is a graduate of Harvard University, author of “real estate investing for family offi ces”, founder of www. usfamilyoffi cerealestate.com, and sits on many Family Office panels regarding real estate investing for Family Offices. Real estate is an important part of any portfolio, especially for family offi ces. Real estate has many benefi ts––from the use of leverage, tax-free growth, and tax deferment to depreciation and mortgage interest deductions, and especially the opportunity for families to build legacy wealth. A good property in a good location can be a long- term family asset, providing cash fl ow, appreciation, and tax benefi ts for generations to come. DJ Van Keuren

Because of these benefi ts, the question then becomes: Arsenault Family Offi ce How can a family offi ce invest in real estate and maximize the benefi ts that real estate has to off er? challenges facing your family or family offi ce related The options available to family offi ces are 1) direct to estate planning, transferring wealth to subsequent investing, (or a subset of direct investing), 2) fund generations, building a business, and creating or investing, and 3) investing through publicly traded preserving wealth. The question then comes down entities such as REITS or individual stocks of real estate to: How does a family offi ce evaluate a potential real and real estate-related companies. For the purposes of estate partner? this article, we will focus on direct investing through joint ventures, separately managed accounts, limited Although you may want to add a few more items to partnerships, and club investing rather than when the your list when evaluating a potential partner, the family or family offi ce invests directly and manages the following are fi ve items that real estate investment property themselves. banking fi rms and institutions consider before investing with a real estate partner. This should help Choosing the right real estate asset to invest in is more with your evaluation of a partner as well as touch of an art than simply investing in what appears on the on some of the areas that should be explored by the latest broker fl yer or what is off ered during a phone call family offi ce during the due diligence process. from a real estate operator. To choose the proper asset and opportunity, one of the best ways to add real estate The fi ve areas are: partner’s experience, partner’s to your portfolio is to partner with another family offi ce strengths, partner’s track record, the economic that has created its wealth through real estate. After all, viability of the investment(s) or opportunity, and as a family offi ce, this group will also understand the alignment of interests with your potential partner.

67 FAMILY OFFICE ELITE MAGAZINE Partner’s Experience during those times? The track record says a lot—it can What is the partner’s experience? Does the real estate give insight into the future relationship with your real partner have experience in similar types of deals, estate partner. Don’t take your partner’s word for it; be property types, and geographic markets for the asset sure to confi rm the track record. that the partner is asking the family offi ce to invest into? Does the partnerer have an excellent reputatioreputation in EconomicEcon mic Viability of the InvestInvestment Project(s) its fi eld, a focused investmentvestment strategy, a proven trackck The investmentvestment opportunity must beb carefully record, and managementment by a team of expexperiencedenced reviewedrevie d to ensure it’s economically feasible and professionals? the partner’sp tner’s ability to secure fi nancing, whether it comescome fromrom public, commercial, or private sources. The As the family offi ce willill look to itsit partner for relative fundingfundi sources and profi ts earned must be legitimatelegitim expertise in the day-to-day-to-day operationsperations of the real and transparent.tr sparent. Also, you should understand whether:w estate opportunity, it mumust have complete confi dence • The projectoject is able to cover operating ccosts over its in the partner’s ability to manage the project not only lifetimelifetim and generate an acceptable rater of return for during good times but also wwhenn things don’t turn out you andan thehe family offi ce. as projected or the marketrket changes dirdirection.ion. • The projectoject is fl exible enoenough to adapt to future changechanges inn user needs, ownership,o laws, regulations, Partner’s Strength anddec economicomic fl uctuatuctuations. Does the partner have both a strong business balancebalan • The project’sect’s fi nanancial models proposed to the family sheet and a personal balance sheet to completecomple the offi ce by the partner are aggressive or conservative? suggested project(s) andnd weather any storms?sto How Ideally, you should understand your potential returns many projects does the partner have in their pipeline from three vantage points: the worst-case, best- and how many opportunitiesnities are ththey evaluating on a case, and middle-case scenarios. Too often, all that is monthly basis to choose from? IIs the partner spreading presented to the family offi ce is the best-case scenario. themselves too thin, or do they have the capacity to • There are similar properties with similar markers from see each of its projects through to fruition? The last existing or recent sales: thing the family offi ce wants is to see an investment • the cap rate projected at purchase or sale; fail because the partner spread itself too thin or took • any increase in percentage in rent over the on too many opportunities because “the market was estimated period; and hot.” Lastly, if you are investing as a Limited Partner • Construction costs and price per square feet are or LP, make sure that your documents do not make applicable; for example, if everyone is renting a you liable for any recourse or carve outs as part of the space for $100/month, the last thing you should joint venture or investment. This should be standard expect is $150/month. so that the only fi nancial risk you assume concerns the capital you invested, but it is better to check before the Alignment of Interests transaction is completed in case a problem exists. Conceptually, in the majority of partnerships, the family offi ce is considered a Limited Partner (LP) and Partner’s Track Record is a passive partner in the management of the deal. When evaluating an investment with a real estate Investment and risk management considerations, for partner, the following questions must be asked: What example, are entirely delegated to your real estate does the partner’s history show? Have its returns been partner, who is also considered the General Partner consistent? How long is its track record? One year? (GP)––but that brings us back to what you are looking Five years? Twenty years? If the partner’s track record for and hoping to accomplish: fi nding an experienced started in 2010, ask whether its success is simply due partner that you can trust and rely on. The success of to a favorable market. Has the partner weathered the partnership model relies on the interests of both he multiple real estate cycles? If so, how did it perform passersby.parties being adequately taken into account.

68 WWW.FAMILYOFFICEELITE.COM One way to address still-existing shortcomings in the than what the true costs are for the property. Although alignment of interests is to implement what we will it is fi ne for the general partner to charge fees, you still call here an enhanced alignment model. The goal of need to have a good understanding of what they are such a model is “defensive”: to ensure that the real to ensure a proper alignment of interests rather than estate Partner or GP and its managers deliver on the a structure that benefi ts the partner regardless of the agreed-upon investment objectives, undiluted by investment outcome. The end purpose of fees is to other interests. compensate the general partner for the expenses that it occurs, rather than to serve as a profi t center. The fi nancial structure associated with partnerships varies greatly; however, a typical investment might Conclusion provide for leverage or debt of 75% on the property Forming a partnership with a real estate operator or real (of which should be non-recourse to the family offi ce), estate family offi ce is an exciting way for family offi ces with the limited partner(s) providing 80%–90% of to gain exposure to real estate as a direct investment, the equity and the general partner investing 10%– which, is an important addition to any investment 20%. All equity will receive a pari passu return to an portfolio. Such partnerships free the family offi ce from agreed-upon level or preferred return, after which the the tedious and time-consuming task of looking at and general partner receives a disproportionate share of evaluating enough deals to make a good decision, and the returns, referred to as a “promote.” Promotes are to operate the property from purchase to sale. negotiated so that the partner, based on leveraged internal rates of returns (IRRs) at the time of refi nancing Many families have created their wealth in a variety of or sale, could earn an additional 25%–50% above a ways. From chemicals and food businesses to hedge certain equity return. funds, each family’s wealth is created from expertise in its respective industry. Knowing that, one of the As the operator of the asset, the GP is generally able best ways to gain exposure to real estate is to fi nd to earn market rate fees for its services, such as another family offi ce that created its wealth through development and property management fees. real estate. After all, by combining a partner’s history, track record, and awareness and understanding of the Some family offi ces prefer a simple structure of a real estate industry with your capital, one family offi ce “50/50” split with minimal fees going to pay the can benefi t from another real estate family offi ce’s basic expenses of the transaction. Sometimes, general experience and, ultimately, from this important asset partners will want to charge fees that may be more class.

69 FAMILY OFFICE ELITE MAGAZINE NOVEMBER 3-7, 2O16

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VISIT FLIBS.COM FOR TICKETS, SHOW INFORMATION AND VIP PACKAGES. THE HEADHUNTERS Proper executive placement By Alan J Cutts, Why you should use a specialist to say, it took fi ve weeks to fi nd four from a “qualitative” opinion to a executive search consultant to fi ll potential candidates for the client, more “quantitative” conclusion. those key roles? each of whom could all tackle the job The simple fact is that no one can in hand. This was choice enough to compete with the combination Many years ago we were called in reach a happy conclusion for them. of experience and objective to meet with a well-known, global, In addition, the client did not have to knowledge about a specifi c industry investment house. The company had pay another huge retainer up front, segment that a specialist, targeted been searching for a key investment just a small fee to cover the initial search consultant brings to the desk head for many months and had research. The fi nal fee was simply table. Add to this the ability to think retained an expensive and high based on the contract given to the out of the box and produce lateral profi le international recruitment successful applicant, without extra solutions for diffi cult assignments, practice to fi nd an appropriate percentages for “entertainment, often where none appear to be individual. They were now at their messengers, contingencies and evident, and you will understand wits’ end as the only candidates that estimated bonuses…” Also it is why the specialist search consultant had been put forward on a shortlist important to note that there was no can command both a reasonable were people they knew already that fee due at a notional second stage; (hopefully not exorbitant) fee and, did not have any confi dence in to we prefer to be paid on results. more importantly, a great deal of undertake such an important role. On the other side of the coin we respect in the market from both The search company had produced have often been called in to meet clients and candidates. a mountain of research and had a client when their management taken nearly six months, eff ectively team has exhausted its collection of Serious search consultants generally to produce no real results. “little black books” and Linked in/ work on a mandated, retained, outlook contacts. basis because the initial retainer When we walked into the meeting engages both parties, committing we were confronted by the Head To succeed as a specialist head- them to each other and building of HR and the chief investment hunter a search consultant has a relationship and atmosphere offi cer. The Head of HR picked up a to be remarkably good at fi nding of mutual trust; the surrounding beautifully bound report from the appropriate candidates and fi lling contract defi nes the relationship incumbent executive search fi rm complex vacancies with unique and etiquette going forwards. Also, and threw it on the desk in front of blends of skills. They should provide retained relationships protect the us; she said, “we have paid £60,000 clarity by acting as an objective client from the depredations of for this heap of rubbish (my word fi lter that functions on the facts, the a contingency only environment. not hers) and it is completely market’s opinions and on their own “Off limits” applies to retained worthless.” After we had examined informed understanding that has clients for an agreed time after the research, we had to agree. It been built on years of experience the latest retained placement is was totally irrelevant and the vast in their market, supported by eff ective – normally twelve months majority of its content was either the candidates’ responses to or longer as agreed. Hopefully the out of date or way off message. She a comprehensive array of key relationship between the search asked us if we felt that we could questions that allow us them to consultant and client will develop pick the assignment up and turn it build reports that are an eff ective so that they need never think again into a silk purse. We picked up the way of comparing like with like. An about time limits on off limits in any sow’s ear and ran with it! Suffi ce it excellent consultant strives to move case and the interests of client and

71 FAMILY OFFICE ELITE MAGAZINMAGAZINEE consultant will totally converge. there should be no rocket science or even when the client has initially The combination of true objectivity witchcraft involved). A good search rejected someone who would seem and total familiarity with the and its corollary good conclusion to be a great candidate! Conversely, nuances of a role and the culture depend on some very simple factors if a candidate checks out badly, a of the hiring company means that and the responsibility for defi ning good search consultant should not hiring a specialist executive search these is shared between the client let their hearts overrule their heads; consultancy to concentrate on and the search consultant. they should be prepared to drop mission-critical vacancies more than them like a hot potato. A large part justifi es the outlay, and the speed at Firstly, it is important to insist on of specialist search consultant’s which they can work should not be a coherent job description. If the skills is their understanding of the underestimated. Generally, most of client and the consultant do not market and their ability to take the delays that occur can be laid at know what is needed, they are on informal references without trying the door of the hiring company. This the road to nowhere. The document to hear what they want to hear or is understandable because clients should not be “War and Peace”, ignore what they do not want to have busy staff with demanding far from it; what is needed is an hear. schedules, they have huge demands agreed understanding of the role, on their internal diaries and often its responsibilities and limitations, Finally, in the complex mix of there are shadowy politics at play and the ideal mix of experience relationships between candidates, behind the scenes. Additionally, and qualifi cations expected from clients and consultants a major head-hunters are realistic enough suitable candidates. Obviously, we skill on all sides is the ability to to understand that they are rarely at all want to hire someone we can be responsive and decisive, even the top of the clients’ priority lists trust and like, but without some kind in the most trying circumstances. for lots of reasons! of defi nition nothing can happen. We all really appreciate good decision-makers who listen to In terms of timescale, the time Secondly, the search consultant valid arguments, make considered lapse from initial briefi ng to fi rst will seek commitment from the decisions and articulate them well. interviews should not take any client and needs to know the full This is how we make that perfect longer than 8 weeks and quite background to the hire including the hire. To quote client views on what often can be quicker than that. In negative points; good candidates we bring to the table: addition, you should expect that will be insightful, plugged into all the candidates put forward can their markets and probably very “Your success with us is founded more than tackle the job in hand good at researching. It helps us to on your understanding of the and each will bring unique skills have the answers to those awkward knowledge and skills you bring to the table. The client’s ultimate questions that they will pose and and your ability to communicate, decision will be based more on to become ambassadors for the relate, and work with us. The cultural and personality issues than client. Often the consultant will candidates understand that you’re raw ability and experience. The aim be candidates’ fi rst ever point of not just trying to deal, but are is to fi nd the very best person for contact with their client so they genuinely in this game trying to the job. As an industry our measure need to understand, thoroughly, get the right results, knowing that of success is long term; we like to the client’s marketing, goals and your reputation and your business hear that the people we have placed culture. Consultants, should be fl ourishes by doing just that” are thriving after years in their willing to take long shots as well roles and that they have become as certainties, because creativity “The soft skills of recruitment are so valued members of their teams. can unearth really special people important, and that’s what you guys Anecdotal and procedural elements where none would be apparent. bring to us. A sense of individual to assignments are fi ne; all of us Also, as trusted consultants, they rather than a commodity, and I thank probably have a good idea of what a should be able to articulate their you for that.” recruiter should be doing (after all, views and make recommendations, www.alancutts.com

72 WWW.FAMILYOFFICEELITE.COM DREAMINGDREEAMMING OF THTHE PERFECT HOLIDAY... SUPERYACHTSSUPEERYA CHARTER THE ULTIMATEULULTIMA LUXURY VACATION

73 FAMILY OFFICE ELITE MAGAZINE Eastern Mediterranean Croatia and Montenegro

Endless sunshine, sparkling sea, beautiful beaches and absolute indulgence: these are the synonyms traditions of the countries covering little seaside villages and towns, of a perfect vacation! With the this area. While the French Riviera off ering an array of restaurants, Spring just around the corner, our and Italy are traditionally the cafés, art galleries, souvenir shops desire to relax on a beach, sip on a most frequented locations by and boutiques. Croatian cuisine refreshing cocktail and bathe in the superyachts, Croatia, together off ers fresh Mediterranean dishes, warm summer breeze ceaselessly with Montenegro in the Eastern with plenty of seafood, vegetables increases. We have been waiting Mediterranean are steadily gaining and local specialities, accompanied for this vacation all year round in popularity. by locally produced selection of and want to make sure that it is as wines. fl awless as possible. Embarking on Dotted with seemingly endless a luxury yacht charter, you can rest amount of islands and islets, One of the most prominent tourist assured that you will be pampered Croatia boasts immense natural destinations and a great starting day and night, while eff ortlessly beauty coupled with charming point for a charter vacations, discovering multiple destinations, architecture of terracotta roofs and Dubrovnik is amongst the most thanks to the made-to-measure warm, inviting locals. It is home to important cities to visit in Croatia. travel itinerary carefully planned numerous UNESCO World Heritage A UNESCO World Heritage Site ahead of your departure. sites, awe-inspiring natural parks since 1979, the city is known and water falls. White beaches, as “the Pearl of the Adriatic” The Mediterranean Sea is without crystal-clear waters, river canyons, thanks to its truly beautiful and doubt the most popular summer glittering lakes, combined with mesmerising Old Town, adorned by destinations for yachting, off ering your superyacht’s water toy Gothic, Renaissance and Baroque beautiful weather, stunning natural selection, provide for unlimited fun architecture, narrow cobbled environment, rich architecture, and entertainment. Cobble-stoned streets and an endless amount vibrant atmosphere and colourful streets wind through charming of museums, art galleries and

7474 WWW.FAMILYOFFICEELITE.COM monuments to visit. Once the sun sets, Dubrovnik dinner at one of the best local restaurants set in the lights up to unveil a fabulously sparkling atmosphere exotic gardens of the 16th century Garibaldi mansion. with numerous fi ne-dining restaurants, high-end Following day, cruise to the Palinsky islands, renowned nightclubs, wine bars or discotheques to visit. If loud for its secluded coves and stunning beaches. This music and dancing is not your thing, you could sample is a great place to unwind, snorkel, swim or simply some of Croatia’s excellent wines in one of the relaxed sunbathe relaxed, away from the hustle and bustle of and quaint little wine bars or sip on a late night coff ee the busier destinations. watching the passersby. An exceptional fi nal destination and situated just A popular stopover for jet sets, movie stars and south of Croatia, Montengro is often included as part discerning clientele, the Croatian island Hvar prides of a yachting vacation in the Eastern Mediterranean. itself on boasting captivating Gothic palaces and It is famous for its breathtaking Bay of Kotor (of Boka impressive 13th-century walls, as well as buzzing Bay) and the recently developed and very exclusive atmosphere and nightlife. For a quieter, yet still very Porto Montenegro marina in Tivat. Known as the exciting excursion, Mljet off ers a unique stopover for southernmost fjord in Europe, the Boka Bay is home to families, or groups of friends travelling together. It is mimosas, kiwi, palm, agave, oleander and pomegranate known as the most beautiful and the greenest islands plants. Kotor, located in the Boka Bay, is yet another of the Adriatic. It is home to the Mljet National Park, famous UNESCO World Heritage town, representing incorporating two salt-lakes: Veliko Jazero and Malo an old coastal and cultural centre boasting charming Jazero, encircled by rich forests and mesmerising churches and ancient squares. Some of the most nature. popular destinations in Montenegro include the 14-kilometre long Velika Plaza (Grand Beach) located Leaving Mljet, set off to the magnifi cent historic in the southern part of the country - a perfect place town and island of Korcula, famous for its traditional for kitesurfi ng or windsurfi ng. Tara Canyon, a UNESCO Knight’s dance, celebrating the Turkish assaults on the World Heritage site and the second deepest canyon in island. The island itself is covered with heavy pine, oak the world, off ers impressive waterfalls and number of tree and cypress forest. Thanks to its unique historic sandy beaches to escape to. heritage, it is amongst the most interesting islands to visit. From Korcula cruise to the nearby island of Vis www.charterworld.com and enjoy a leisurely day, followed by an exquisite [email protected]

Photos © Heesen Yachts

7575 FAMILY OFFICE ELITE MAGAZINE SATO CONSULTANTS Family Offi ce Services RIGHT TO BE FORGOTTEN SERVICE - MEDIA CRISIS PLANNING AND POLICIES - PUBLIC RELATIONS - REPUTATION & MEDIA MANAGEMENT

SATO Consultants is a specialized consultancy fi rm to Family Offi ces and UHNWI’s.

Tel: +44 (0) 20 7193 8870 www.satoconsultants.com - [email protected]

76 WWW.FAMILYOFFICEELITE.COM Regulatory Changes to Money Market Funds WHAT SHOULD A FAMILY OFFICE DO WITH THEIR CASH Securities and Exchange Commission’s decision to tighten regulationstions on money market fundsfun TWO YEARS TO IMPLEMENT CHANGES by Michael Kastner - Halyard Asset Management LLC

allowed to maintain a stable Net gate or a redemredemptionion fee is needed, Asset Value and will, instead, be in which cacase they can apply either required to allow the NAV to fl oat. or bothboth. Giveniven that U.S. government In addition, all fund companies, MMMMF’ss invest almost exclusively in individual as well as institutional, the massive, highly liquid Treasury will be allowed to temporarily bill market,rket, such a gate is not likely block investor redemptions, also to be needeneeded. However, simply known as gating, and impose a the possibility of an exodusodus may redemption fee of as much as 2% be enough to discourage inveinvestors in the event of a mass exodus of from using government MMF’s investors. Such an exodus would funds. One only needneeds to look be defi ned as a 10% fall in assets back two years for ssuch a risk, as under management over the course Congress threatenedthreate to default on of one week. When investors come maturing TreaTreasury securities. While Recently, the Wall Street Journal to understand that a 200 basis theyhey avoidedavoi default, had they not, reported that “U.S. regulators point fee could be imposed on a it’s’s liklikely there would have been a approved rules intended to prevent money market fund that’s paying mass exodus out of Treasury paper a repeat of an investor exodus out them no more than a handful of and a fl ight from government of money market funds during basis points, they’re likely to look MMF’s. the fi nancial crisis,” referring for an alternative. to the Securities and Exchange The catalyst for the added Commission’s decision to tighten The likely alternative to Prime regulation is that despite the regulations on money market funds would be U.S. government presumption of being safe, stable funds (MMF’s). We believe the rule MMF’s, funds that invest only in U.S. investments, some MMF’s are not changes do the exact opposite and Government debt. Those funds will always very well managed. Based will likely worsen an exodus, and be required to hold at least 99.5% upon SEC rule 2a-7, the funds are perhaps even hasten one. The of their assets in government paper, allowed to hold up to 5% of a single commission gave fund managers that’s an increase from the current issue and up to 10% exposure to two years to implement the minimum of 80%. Additionally, a single guarantor, an intolerably changes. U.S. government MMF’s will not high level of concentration for be subject to the mandatory a fi xed income portfolio. In an The most signifi cant change, at redemption gate or fee imposed attempt to understand the riskiness least initially, is that Institutional on Prime MMF’s. That is unless the of MMF’s, we analyzed a number Prime MMF’s will no longer be board of the fund decides that a of the largest funds. We were

77 FAMILY OFFICE ELITE MAGAZINE shocked by the composition of one changes to money market funds, maturity at two years, establish of the top 5 “household name” what should a family offi ce do with a minimum weighted average funds. The top 10 holdings of the their cash? Family offi ces typically credit rating of “A,” and maximum fund totaled 49% of the portfolio, carry high cash balances in MMF’s holding per position of 2.5%. with 15% of the fund invested in to meet cash fl ow needs and as By moving cash to a separately Japanese banks (including 7.1% “dry powder” for unexpected managed account, the family offi ce invested in the bank of Mitsui investment opportunities. Such immunizes itself from both the Sumitomo alone), 20% invested an arrangement may no longer be risk of having their cash gated and in 10 diff erent European banks, feasible given the potential for lock the detrimental eff ect on return and 10% invested in Canadian up and fee imposition. That could when the MMF manager is forced and Australian banks. When the be a blessing in disguise given the to sell securities in a falling market next fi nancial crisis hits, it’s highly high concentration risk and lack of to meet redemptions. While it’s likely that the 20% allocation to diversifi cation discussed above. possible that the separate account European banks will weigh on the Instead, family offi ces should may incur a mark-to-market loss NAV of that fund. Similarly, should adopt a cash management strategy during such a run, the manager may the Japanese stimulus program fail similar to that of many Fortune not be forced to sell into a falling and bank defaults rise, the large 500 corporations. The CFO’s of market and if the manager holds Sumitomo position may impact those corporations hire third-party the securities to maturity, would the fund negatively. That, and a managers and work with them to incur no loss at all. In eff ect, the number of other possible scenarios, establish a separately managed family offi ce gains full transparency are likely to test the resolve of the account of fi xed income securities and decision-making over their fund management to maintain governed by a strict investment cash assets while broadening the liquidity and resist the temptation policy statement. A typical cash diversifi cation of the portfolio. to impose a 2% redemption management investment policy fee. With the coming regulatory statement would cap maximum Halyard Asset Management LLC

BEAUFORD HOUSE CHELSEA LONDON Beaufort House Chelsea, is the Kings Road’s premier This exclusive venue has won a number of awards brasserie and private members’ club. Set over including “Best Private Members Club” in the four fl oors and boasting a brasserie, two-cocktail London Lifestyle Awards, and it was also voted bars, an exceptional penthouse champagne bar, “Best Private Members Club in London” and is a stunning private members lounge, as well as deserving of such an accolade. Beaufort House has a surround sound meeting room complete with established itself as a much-needed breath of fresh state-of-the-art screening facilities, Beaufort air for the Kensington and Chelsea area. From fi lm House excels where other venues merely strive. It premieres and magazine launches to high-profi le has developed a reputation for outstanding service guests, musicians, actors and socialites, preserve and beautiful yet comfortable interior, making it of the rich & famous, from royalty to rock stars, London’s offi cial ‘home away from home’ and one Beaufort House has asserted itself as The club in of Chelsea’s premier venues. the heart of Chelsea, London.

78 WWW.FAMILYOFFICEELITE.COM A long-recurrent debate in the fi eld of investment management MAN - VS - MACHINE The arms race of machines has already come a very long way WHO WILL WIN OUT IN THE END? by Con Keating

and the long term with economic and trend-following strategies, performance, and the degree to where machines reign supreme. which the companies, in which we Markets are mixed games; partly have invested, participate in that exogenous, against nature, but performance. predominantly endogenous, against others. The game against It is amazing how few fund managers others is a strategic game; it is zero- consider the development of the sum in the sense that my gains are labour versus capital share of someone else’s losses. The game national output when discussing is concerned with predicting the long-term prospects, the most behaviour of others. This aspect fundamental division of the is the subject of intense research cake, but that is getting ahead of by the computer scientists, with ourselves. The properties of long- natural language interpretation term investment diff er profoundly and sentiment analysis as poster from the short-term. In the short children. This is a long-recurrent debate term, returns are dominated by in the fi eld of investment changes in the prices of assets but There is little doubt that these management. To open this issue in the long-term, income dominates techniques will advance greatly, up in a meaningful way and avoid returns, and asset prices are almost and perhaps even to the point confusions, it becomes necessary irrelevant. of passing the Turing test of to consider diff erences in time indistinguishability from human scale. This is the short-term versus The exponential comes into its own, interaction. This is an arms race, long-term question. The diff erence and the power of compounding ever more powerful; ever faster between weather forecasting and reigns supreme. The market machines are needed. The strategic climatology is a very useful analogy. adage, that time in the market is game of development drives even In the fi eld of weather forecasting, more important than the timing of more development in an unlimited we use some of the largest and markets, remains sound. In the short process of infi nite regress, where fastest computers in the world, term, market returns are negatively the only limitation is one of cost – but we cannot forecast accurately correlated with economic output, at some point the investment cost beyond a few days – weather but in the long-term, returns are is not justifi ed by the potential forecasting is fundamentally strongly correlated with long- reward. In the long-term, volatility, short-term. Climatology is very term economic growth. In the is broadly in line with the volatility diff erent; we can rely on it being short-term equities and bonds are of national output. Rather than warm in summer and cold in winter; highly volatile; this arises from the being some unexplained property of monsoons, snow and fl oods are endogenous game between market mean reversion, this is convergence highly predictable. The investment participants and speculators. This to economic reality. While this is counterparts are that the short term is the world of hyperactive trading, not always immediately apparent is concerned with market behaviour and information-free momentum in the patterns of seemingly

79 FAMILY OFFICE ELITE MAGAZINMAGAZINEE chaotic securities prices over time, it problem is simple; for decades, new is more clearly demonstrated in the housing construction has languished foreign exchange markets, where at around 50% of new household a relatively small stock is turned formation. The remedy is far more over manically. The result is a diffi cult, politically; when more than short-term series totally dominated 50% of voters are house-owners, by noise, but where, in the much they are most unlikely elect any longer term, basic macroeconomic party that does not serve their pressures prevail. In the long-term interest. diversifi cation is concerned with the number of eff ectively independent Surveys have asked fund managers sources of income, while in the short what they consider the long-term term it is all about the happenstance to be, and the most common answer diversity of periodic returns, and received has been 3-5 years. When relative price performance. we look at fund managers’ turnover in active portfolios, it is clear that, in The arms race of machines has fact, the overwhelming majority are already come a very long way, to operating to a timescale of between the point of fl ash crashes and the a few months and two years. If we inexplicable behaviour of the ten- take the long-term for investment year US Treasury bond on October to be that term beyond which 15. The domination of fi nancial non-market sources of cash fl ow markets by short-term speculation dominate returns, then we see that is not benign. Volatility is, as Black the long-term over the history since Scholes formalised for us, the 1900 of the London Stock Exchange speculators’ friend; it drives up has been a little over thirteen years. premiums or prices. The problem Prospectively, the lower income with these higher prices is that this yields prevailing today imply that lowers the income yield available the long-term now is a little over to investors. The higher volatility twenty-fi ve years. will also drive a wedge between the annual returns of the short-term and The most important facet of our the compound geometric returns long-term future is that it is largely of interest to long-term investors; the product of our own decisions twenty percent price volatility and actions, where the socio- lowers long-term returns by 2% per political aspect can dominate annum. Short-term speculation is the technological or economic more than a beggar-my-neighbour dimensions. The choice of man game, it literally steals from the versus machine is really no choice; future. every day, we decide to take an umbrella or not depending upon the To make these points a little more weather forecast, but we book our concrete, consider the UK housing holidays based on the climate. Of market. For several decades, course, the weather forecast does we have seen ever-increasing not aff ect the climate, but short- house prices, greatly assisted by term speculation most defi nitely munifi cent mortgage leverage, and does aff ect long-term investment now our children cannot aff ord to performance. buy anything. The diagnosis of the

80 WWW.FAMILYOFFICEELITE.COM COLLECTING AND INVESTING

1. Woman with a Mirror 2. Marguerite-Flower 3. Builders

IN CHINESE MARKET POCKET WATCHES

From the time of the Jesuits’ fi rst treasures returned to Europe with a Mirror’ (in the Louvre encounters with China in the after the burning of the Emperor Museum). It is framed with swirls of late sixteenth century, the gift Qianlong’s Palace in 1860, and in half pearls and rubies, and despite of timepieces to the Chinese the aftermath of the Boxers’ siege its superb quality, neither the imperial court became a de rigour of the European legations in 1900. watch mechanism nor the enamel requirement of trade, dominated The continuing chaotic state of painting is signed. The second until the late eighteenth century by the country after that provided example, by the premier Geneva British made clocks and watches, further opportunity for signifi cant fi rm of Piguet and Meylan, has but from the late eighteen century ‘repatriations’. the back decorated to represent through to the 1930’s dominated a marguerite fl ower. Each enamel by Swiss watches and automata. So what is the Swiss Chinese petal is painted with diff erent fl oral market watch? The three examples motifs, and delineated by lines The ‘golden age’ for these pieces shown, made c.1820–30 are gold of half-pearls (over 300 in total). was c.1790 to 1840 when the cased, with a white enamel dial, The centre shows a landscape, Chinese market could aff ord the quarter repeating, (sounding the probably by the Swiss artist Jean- sumptuous watches made by quarters on two gongs within the Louis Richter. The third example the combined skills of Genevan watch), and with a sweep centre shows a watch with an automaton enamellers, goldsmiths, jewellers seconds hand. The Chinese liked scene, in which the fi gures of and watchmakers. This trade was the centre seconds hand because workers in multi-coloured gold, promoted from the early nineteenth it showed that the watch was hammer and saw, whilst the water century by numerous Swiss houses ‘alive’. The decoration of each of fl ows via a rotating millwheel, all having establishments in China - these watches is outstanding. The accompanied by a melody played at Canton, Tianjin, Shanghai and back of the fi rst has a fi ne enamel by a tiny musical movement. With elsewhere. Many of these imperial painting, after Titian’s ‘Woman all antiques, the better the quality

81 FAMILY OFFICE ELITE MAGAZINE the greater the value, in this case now greatly increased by the interest of Chinese collectors. Watches from the PHILANTHROPIC CAUSES Swiss ‘golden age’ command the highest prices at auction that, over the last twenty years, have grown substantially. Watches with these fi ne enamels are typical $35,000– UNIVERSAL FILM AND $65,000, but with fi ne jewellery decoration, this price can rapidly escalate to over $200,000. Examples include a fi ne FESTIVAL ORGANISATION watch by Ilbery with a fi ne enamel waterfront scene that fetched $231,750 in 2012, and another, by perhaps the best fi rm making these watches Piguet and Meylan, with minute repeating and an enamel of Venus and Cupid in the same year fetching $700,000 (both sold by Antiquorum).

A popular automaton scene on these watches is of a The Universal Film & Festival Organisation dog attacking a swan, the dog making a barking noise. A (UFFO) was founded to support and good example of this automaton watch in Sotheby’s New implement a best business code of practice York sale in June of this year fetched $130,000. These for fi lm festivals throughout the world. It is manufacturing techniques are also found in Swiss bijou now dubbed ‘FEST-COP’, and its logo is now terce often including watches, which were also popular a familiar sight at many fi lm festivals. The UFFO is a global not-for-profi t voluntary Chinese market items. However this genre is even more organization, and it created its remit of a best diverse and sumptuous, and accordingly overall much business code of practices for fi lm festivals more expensive, as shown by the sale of a small singing to combat the high level of corruption that bird fl ask by Sotheby’s New York in June, which fetched blights the industry. $2.5 million. Its president is legendary actress Maureen The Chinese market watch, embodying beautiful enamels, O’Hara and the organization now has at least automata and complex watch work, and an incredible 225 fi lm festival members. diversity of creativity poses diffi culties for the investor in judging what to buy and what to leave. Enamels are easily UFFO’s FEST-COP is entirely voluntary, damaged, are very diffi cult to restore, and, even if well free and easy to implement. Also, it is a done, never have the same appeal as an intact piece, but blueprint for fi lmmakers in deciding which complex watch, musical, and automata mechanisms can all, fi lm festivals to do business with. Only fi lm festivals that have subscribed to the UFFO at a cost, be restored. The investor and collector must have best business code of practice are entitled to a good deal of knowledge, and good advice to venture into use the UFFO logo. this market. Nonetheless, for the astute investor this fi eld has provided many rich rewards, and Chinese interest in The organization is now seeking a the genre remains unabated. benefactor to help it move forward with its plans to further its remit and to create an Ian White; the writer of this wonderful piece is researching online porthole payment system to ensure the export of timepieces from Europe to China over the fi lmmakers can deal with fi lm festivals via a period 1580 – 1840. He is the Author of English Clocks trusted source. The porthole will also act as for the Eastern Markets and the Author of The Life and a distribution platform and as an online TV Collection of Gustave Loup (1876–1961).He is currently channel. writing a book on the Swiss made Chinese-market watch, provisionally entitled, The Majesty of the Chinese Market UFFO is now planning the ‘Best of Festivals’ event and bringing the member festivals, Watch. their best fi lms, actors, directors and producers to one event that will rival the [email protected] biggest events in the world.

Email info@uff o.org. - www.uff o.org

82 WWW.FAMILYOFFICEELITE.COM PRIVATE BANKING NOW COMES WITH AN INVESTMENT BANKING FLAVOUR by Christian Fringhian Partner, co-head of Reyl Corporate Advisory & Structuring SPECIAL PERMISSIONS FOR RE-DISTRIBUTING THIS ARTICLE ARE NEEDED, CONTACT US

In a time when Swiss private banks are being forced to revamp a business model relying heavily on wealth management, it is worth paying attention to a stimulating initiative currently taking place in Geneva. Located in the heart of the city, near the Old Town, REYL & Cie has been actively engaged over the past few years in renewing its approach to private banking, thus opening new perspectives for the entire Swiss fi nancial sector. The main idea underlying its approach consists in completing its wealth management services with high added- value corporate advisory services. In the view of its executives, who favor a cross-border entrepreneurial clientele, private bankers with corporate banking DNA might very well make the best wealth managers.

The aftermath of the 2008 fi nancial crisis has taken a painful toll on Swiss private banks. The Swiss banks do not necessarily see them as an area of focus, fi nancial marketplace has certainly displayed overall corporate assets obviously fall into the category. strong resilience, but its banks still need to cope with REYL & Cie has therefore committed to fi lling the gap, constant margin erosion. Increases in costs due, in eager to prove that corporate advisory and wealth particular, to new regulatory constraints, are forcing management can develop synergies aimed at creating the wealth management industry to re-examine its long term sustainable value for clients. value proposition as well as its business model. Swiss private banks are thus incentivized to innovate and REYL & Cie was created in Geneva by Dominique Reyl fi nd relays of growth in order to remain competitive. in 1973 as a wealth management boutique. His son In that regard, the corporate angle certainly deserves François, who joined, in 2002, initiated a signifi cant more attention. diversifi cation program. Over the past 14 years, REYL & Cie has developed a diversifi ed range of fi nancial Rather than focusing strictly on fi nancial assets, services which now encompass Wealth Management, the bank has widened its value proposition to the its historical core business, Asset Management, customers’ asset base in its entirety, no matter how Corporate & Family Governance, Corporate Advisory complex it might be, to the extent that it now includes & Structuring and most recently Asset Services. corporate advisory services. Partners at REY & Cie are Across these fi ve distinct yet complementary business confi dent that a private bank needs to move beyond lines, the bank is developing a client base consisting portfolio management, and must be able to address all mostly of institutional investors and cross-border constituents of their clients’ overall wealth. Although entrepreneurs with an expansion strategy geared

83 FAMILY OFFICE ELITE MAGAZINE towards high growth regions such as South-East Asia the harsh realities and challenges of developing a and the Middle East. business, acquiring over precious time experience. REYL & Cie has the particularity of being a private bank The Corporate Advisory & Structuring business line managed by former renowned investment banking was launched in 2013 with the ambition of assisting professionals. international entrepreneurs in the most critical stages of their business expansion. Drawing on an François Reyl, CEO of the bank, embodies this concept interdisciplinary team with in-depth expertise, REYL of convergence. Between 1995 and 2002, he worked & Cie covers most sought-for areas such as strategic at Credit Suisse First Boston in London, where he advice, fi nancing strategies, capital raising, balance executed numerous mergers, acquisitions, leveraged sheet restructuring and optimization, recapitalization, buy-outs as well as equity and debt capital markets mergers, and acquisitions.tions. OvOver the past two years, it transactions. « This is the kind of background that our has also acquired a solid know-how ini the particular clients value”, says François Reyl. “They prefer to talk fi eld of private debtbt fi nancing, an innovativeinnovativ yet too a privatevate banker who ununderstands how important aff ordable funding solutionolution for entrepreneurs loolookingg their businessessinesses are in building up thetheir wealth. for an alternative to bankank lending. The pprofi le of Lorenzo Rocco di Torrepadula shows a However, corporate advisoryvisory services addad up to a larger similasimilar pattern. Lorenzo worked with François Reyl picture. “The value wee create at tthe corporate level in LoLondon,on, at Credit Suisse First Boston, which he contributes substantiallyally to grogrowinging the asset base”, also leftl in 2002 to join REYL & Cie. A partnpartner and says Christian Fringhian,ian, whoho heads this business membmember of the Executive Committee, LoreLorenzo is now line. “Here lies our key sellingelling proposition. In many co-resco-responsiblensible for the Bank’s wealth management ways, we ensure our clients that the development of activitactivities in Switzerland. their corporate assets will be fully integratedtegrated into the overall wealth managementment process. Also a partnerartner and a memberm of the Executive CommiCommittee,e, Christian FringhianF is in charge of the We have succeeded in aligning wealth managemenmanagement Global Corporaterporate AdvisoryA & Structuring practice. He services with corporatete advisory services in an has gained over time a solid expertise in this particular integrated way. Few banksanks can actually proprovide this fi eld. His career fi rst took him to JP Morgan, in 1992, and kind of approach. Manyy of them are useused to having then on to Deutsche Bank in Paris and London. Next, separate divisions whichh can create challenges when he moved to Barclays Capital, where he led the Public interacting with each other.her. REYL & Cie, on the other Sector Solutions group, developing and managing a hand, can quickly and effi cientlyci mobilize a multi- range of advisory services in the areas of Debt Capital disciplinary team around a joint project. Our main Markets and risk management. strength is that we understand the central role played by the company in the wealth creation process. We have Wealth Management might be our core business always considered companies as assets in their own line; he sums up, but the corporate advisory is a big right and we have assembled the resources required part of our genetic code”. REYL & Cie might still be a to incorporate the entrepreneurial dimension of our newcomer in the corporate advisory landscape but the clients into the wealth management framework”. bank’s latest performances suggest a promising future. Five years ago, REYL & Cie’s assets under management For REYL & Cie, adding Corporate Advisory to the accounted for CHF 4 billion. At the end of last year, they value proposition follows a natural path. Companies were closing in on over CHF 11 billion. The corporate have always formed a familiar work environment for advisory expansion clearly contains a recipe for success the bank’s managing partners who have previously and, as such, it is certainly catching the attention of distinguished themselves in well-renowned other Swiss wealth management fi rms in search for investment banks. For years, they have dealt with relays of growth.

84 WWW.FAMILYOFFICEELITE.COM NEW GENERATION PRIVATE EQUITY Leading the mega trend of European SME Acquisitions dubbed the ‘greatest transfer of wealth in history’G by Stephen Greenwood

A recently established ‘new-generation’ PE fund has opened up to investors the prospect of high rewards generated by combining the acquisition of profi table SME businesses with employee ownership. This ethi- cal investment hybrid is the Acuity Private Equity Fund and predicts 25% plus returns annually over the ten year life span of the investment. One of the most suc- cessful business models operating in current markets is that based upon employee ownership. The best known example of this is the John Lewis Partnership, dubbed ‘the socialist on the High Street’. All 69,000 permanent employees are Partners who own John Lewis department stores, Waitrose supermarkets, an online and catalogue business, johnlewis.com and a Stephen Greenwood direct services company, Greenbee.com, with a turno- Acuity Management Limited ver of nearly £7bn last year. ity equity. The Fund is executing a strategy that directs According to research carried out by the Employee this ethical approach to acquisition towards the de- Ownership Association, employee-owned companies mographics of the baby-boomers born between 1947 consistently outperform the FTSE All-Share, with a and 1957. Thousands of ‘grey entrepreneur’ business 9.9% boost to share value (Martin Conyan and Rich- owners across the EU are now turning 65 years old and ard Freeman, Shared Modes of Compensation and want to retire but wish to leave in such a way as to pro- Company Performance, National Bureau of Economic tect their legacy and see their staff rewarded. This has Research, Working Paper 8448). Other research shows been called the ‘greatest transfer of wealth in history’ that this model outperformed the FTSE-100 through- but the fi nancial crisis of 2008 means that these busi- out the post-credit crunch crisis, generating 174% nesses, while established and profi table, are fi nding it greater earnings per share (EPS). All very well, but how diffi cult to fi nd buyers. can this include a return for external shareholders? The principal architect of Acuity, Stephen Greenwood, Many of these businesses now face the very real pros- believes that an answer to this conundrum has now pect of disappearing, eff ectively wiping out decades of been skilfully engineered. “This is the only fund in the dedicated work and destroying the livelihoods of their world that acquires the majority equity of between employees, with the knock-on negative impact that this 60%-70%, for example and creates employee owner- will have on their local communities. Nearly a third of ship by allowing the employees and managers to own all the 19.3 million SME’s in the EU are owner-managed 30-40% and benefi t from higher growth for investors businesses (OMBs) set up by the post-war generation. and co-ownership with employees ” he explains. Col- Many of these businesses would, pre-2008, have been laborating in a Joint Venture with Close Brothers Mer- up for sale. According to the European Commission re- chant Bank enables the Fund to use only small slices ports on Succession there are 690,000 profi table trad- of equity investment while still obtaining the major- ing businesses that must fi nd new owners each year for

85 FAMILY OFFICE ELITE MAGAZINE the next ten years. This will continue up until 2025 and – the targeted return is more than 25% for the life of the involve businesses worth an estimated €27.3 trillion Fund. Greenwood himself has some form in this regard that must fi nd a new owner. as he was involved in a joint venture with Mitsui Sumito- mo that acquired a portfolio of 122 SMEs over 15 years Before the credit crunch, the exit strategy for such busi- for £600 million that was worth more than £1 billion at nesses was relatively simple: a management buy-out the time of disposal. Highlights included the acquisition (MB0. The credit crunch put an end to that, devastat- of the North West chemicals company Multisol for £31 ing the MBO market is so that there is barely any activ- million, which was valued at £80 million on exit. ity compared to pre-2008 levels: less than 10%. The reasons are two-fold: the banks will not lend and the Greenwood and his team have developed three new private equity houses are only interested in the bigger buy-out frameworks or ‘intelligent buy-outs’ that are businesses, typically £60 million plus (as shown in Pri- tailored to acquire the SME’s that private equity houses vate Equity Demystifi ed 2012 by Prof Mike Wright and ignore, those worth between £1m and £25m. These John Gilligan). For business owners of the baby boomer ‘IBO’ vehicles are unique to Acuity and are registered as generation succession is the key issue as there is no easy intellectual property and legally protected as such. The way of realising the true value of their business while three types of framework are Management Involved Buy also safeguarding jobs and creating the conditions for Out (MIBO); Management and Employee Involved Buy future growth. Out (MEIBO); and Employee Co-Ownership (ECO). These are based on sharing the ownership of the business – The option to sell to the employees preserves what is and its increasing value - with managers and employees, unique and special about the business – its DNA – while but taking a long view. ensuring that it is owned and managed by people who share the values and vision of the outgoing owner. Em- Again, unlike traditional private equity houses, Acuity ployee ownership also preserves jobs and the contribu- plans to keep the companies in which it invests for 10 tion that the business makes to the economic viability years, not fi ve, and so that investors will benefi t from of the area in which it operates – the aim of many social long term dividends. In fact, Acuity has already bought a enterprises. small number of businesses and is expecting to distrib- ute its fi rst dividend in May this year. Though the amount There is a ten-year window of opportunity in which the to be paid has yet to be decided, the Fund says that al- Fund can take its pick of the very best SMEs available. ready the return on investment has been an extraordi- The Fund has six basic criteria in selecting suitable busi- nary 560% due to the eff ect of gearing. The Acuity Fund nesses: off ers an alternative investment for sophisticated inves- • Ten years of profi t tors who want to diversify their portfolio with exposure • Strong managers in the developed economies while remaining true to the • Recession resilient social values of economic security and job creation. It • Defi ned market niche also off ers a potentially high earning investment at a • Unrealised growth potential time when yields from many conventional asset classes • Long-term dividends are sharply diminished.

The Fund is currently invested equally within the three The Fund’s combination of a high yield with a social im- sectors of Industrials, Procurement and Media but the pact has led to a number of coinages, with some terming strategy is based upon demographics rather than being it ‘The Ethical Acquisition’ while others prefer “Socially sector specifi c and neither is it limited by geography: it Engaged Capitalism”. Based on the Berkshire Hathaway will acquire SMEs in any EU state. The team behind Acu- model, the Fund’s strategy is for long term investments ity has put a lot of eff ort into creating buy-out vehicles that off er a high yield while being risk-averse so that the that create what Greenwood terms ‘a low risk environ- initial capital is protected and secure. ment for investment’ that will also deliver high rewards www.acuityag.com

86 WWW.FAMILYOFFICEELITE.COM Art Finance & Law Art Law Foundation Conference Series by Anne Laure Bandle & Sandrine Giroud

Anne Laure Bandle Sandrine Giroud

The practice of art fi nancing and between art funds and hedge funds, to other asset classes such as gold, investment is representative of the peculiarities of portfolio and equities, and wine. She chaired the the development of the art marketrket fund management, the diff erent fi rst round table discussion which over the pastp decades.. IIt’s no types of loanloans against art collateral, explored whether the Art market longer exclusive to a small groupoup and the risks and rules for art needed more regulation. David of players and hasas grown in size,ize, investments. The series is organorganised Arendt, Managing Director at the scope and fi gures. The marketmark has in partnership with Falcon Fine LuxembourgLu Freeport and Philip also transformedtr sformed the purposepurpo of Art,Art, Sotheby’s,Sotheby’s, LALIVE, borroborro andand Hoff man, Founder and CEO at the buyingbuy g and holding art. GeneraGenerationsons Oblyon.Oblyon. FineF Art Fund stated that they ago,go, collectors owned masterpmasterpiecesces welcome existing regulation, as it like treasures; they bought whathat The fi rst conference of the made the Art market more effi cient. they liked. Today, as art prices haveve series was held in LondonLondo at the Karen Sanig, Head of Art Law at soared, art buyers can considerconsid a Institute of ContempoContemporary Art and Mishcon de Reya, stressed the proofi t as part of their decision. attracted a wide ranger of industry diffi culty of fi nding a consensus and professionals, media and students. creating a law. She warned that the Last November,Novembe Geneva-bGeneva-basedd Several expertsex demonstrated to law is not always suited to govern Art Law FoundatioFoundation launched a what extente they can foresee and Art related issues, particularly conference series on “Art Finance & reducered the risks in art investment with regard to authenticity Law: Risk, RuRules and Opportunities and why Art as an asset class is disputes. Instead, the art market in Art Investment”.In This aims to particularly challenging when has begun to regulate itself. The examineexam the growing practice of compared to other types of assets. speakers seemed to agree that art investments and the use of art overregulation might kill the Art as an investment asset. With the Melanie Gerlis, Art market editor market. An example was provided help of many renowned speakers at The Art Newspaper and author by Marco Mercanti and Stefanie from academia and practice, the of the book Art as an investment?, Berloff a-Spadafora CEO and Head series explores securitisation of art warned of the risks that art of Legal at Oblyon. They showed as an asset class, the diff erences investment entails by comparing Art how applicable export laws in Italy

87 FAMILY OFFICE ELITE MAGAZINE made art business diffi cult, thereby of such businesses shows the Top legal experts such as Luc causing a lack of growth in Italy’s market’s thirst for liquidity. Thévenoz and Xavier Oberson Art market. The afternoon session of the University of Geneva, and on art lending was introduced The second conference of the James Carleton of Farrer & Co LLP by Anna Dempster, Associate series will take place in Geneva on will also share their expertise on Professor at the Sotheby’s Institute 26 January 2015. Jointly organised the issues of banking, fi nance and and editor of the book “Risk & by the Art Law Foundation and tax law related to art investment . Uncertainty in the Art World”. She the Centre for Banking and underlined the limits of traditional Financial Law of the University of These experts will, in particular, economic models when applied Geneva, it will approach the topic look at issues of compliance in the to the art market. The market’s of art fi nance and law from the art market: banking compliance, idiosyncrasies, including factors perspective of players of the local provenance, authentication and, which cannot be calculated, such market such as Frédéric Dawance against the background of an ever as emotions, call for expert advice of Banque Lombard Odier & Cie SA, attractive art market, discuss the in order to successfully manage the Manuela de Kerchove of Schroders, recurring question of a need for risks tied to art transactions. During Yann Walther of the Fine Arts Expert more regulation. a roundtable discussion, various Institute and Yves Bouvier of Natural players in Art lending explained Le Coultre. Other international As Andy Warhol once said “Making their model and due diligence on experts, including Jan Prasens of money is art and working is art an art assets’ title, authenticity Sotheby’s Financial Services in New and good business is the best art.” and quality. Further legal issues in York and Fabian Bocart of Tutela This conference series will be an art lending were enumerated by Capital in Luxembourg will provide opportunity to have a sense of Amanda Gray, Associate at Mishcon their view on the evolution of art our time and examine whether art de Reya. Overall, the expansion in as an asset class and the risks and investment has become an art in art lending models and the growth opportunities in art investment. itself. THROUGH THE DIN Philip Watson, Head of Global Investment Lab, Citi Private Bank. The Global Investment Lab is a unique team dedicated to helping Family Offi ces better understand their investment portfolios – supporting their needs in areas such as portfolio construction, asset allocation, risk management and investment strategy.

Family offi ces require simple and cost eff ective solutions for their diverse day-to-day challenges. One area of concern that surfaces all too frequently is the question of how to best manage portfolios of disparate assets. These are frequently advised by a collection of third party providers, all with diff erent custody arrangements and advisors. Philip Watson Bringing the Contours of the Hill into Sight Citi Private Bank On the surface, the inherent diversifi cation within the multi-custodian and multi-advisor model appears to the US slowdown at the start of the year. The tension satisfy many. However, the challenges this places on in the Crimea seems like an age ago. Family offi ces family offi ces often outweigh the benefi ts. It is not have needed to navigate these – and more so, their uncommon for a family offi ce to be managing fi ve or more eff ect on investment portfolios. Living through banking relationships, with hundreds – or thousands the moment is one approach. Another has been - of positions of negligible size within the overall for family offi ces to cross proactively examine and portfolio. While the original premise was to diversify stress the portfolio to identify potential sensitivities: risk, the unintended consequence is a heavily diluted Unravelling risks inherent in a portfolio, fathoming and unwieldy portfolio. This leads to portfolio inertia: the outliers, and distinguishing the likely from the even strongest performing assets end up contributing probable. Irrespective of risk profi le, this approach very little. Moreover, the practical realities of combining works for many for the way that it not only identifi es investment oversight with administrative governance - the risk but helps quantify them about others. The multiple statements, diff erent vehicles, myopic (possibly old truism ‘investors chase returns, not asset classes’ confl icting) advice - can lead to an overall absence of continues to apply today with a noticeable absence clarity on the big picture. These requirements - with of cult in any asset class. Family offi ces are adept to their associated cost and time pressures - are akin to deploying capital across the cycle dynamically – both juggling balls: the situation is manageable until it isn’t! by asset classes and product type. In this environment, Bringing the contours of the hill into sight before taking however, it is the underlying risk dynamic that is the journey up is a critical step. Once that lens is in place, important, and while solutions change, the underlying the family offi ce can focus on making holistic, objective risk may end up remaining static. Perhaps amending and proactive decisions. the adage to “investors acquire risks, not asset classes” may be more appropriate. Throwing water Risk - What Really Matters? on conventional approaches, family offi ces need an 2015 has been a year abundant with mini “crises”, most approach that cross-examines their portfolios in an recently a global growth panic, a Greek debt crisis, and alternative way: linking consequences to implications.

89 FAMILY OFFICE ELITE MAGAZINE The modern investor seeks to classify risks as exposure especially, family offi ces are increasingly seeking factors that identify what is driving returns. This solutions for downside risk management and refi ning factor analysis, as the name suggests, applies complex their approach to risk management. mathematics to categorise a portfolio into a set of actionable factors. By way of example, these factors Among the most prominent trends is a deliberate shift might include macro factors such as US industrial to redefi ne the purpose of portfolios from ‘benchmark production, specifi c market (e.g., Latin American orientation’ to an outcome-based solution. In turn, equities), or factors such as “valuations”. Identifying this has raised the prominence of an absolute return which factors a portfolio is sensitive to (out of literally strategies - including hedge funds - as invaluable hundreds of potential ones) can help guide a family sources of risk-adjusted contributors rather than solely offi ce on the key drivers of return and isolate potential alpha. Family offi ces are also increasingly deploying duplications in risk. well-defi ned segregation strategies that result in separate pools of capital run to diff erent mandates. This additional information is also vital in identifying This may be by asset class, risk, motivation (e.g. pre- the right solution. With the result being that family, defi ned level of income) or exposure groups. This offi ces can make a better-informed decision on whether brings the ‘contours of the hills’ back into sight and to hedge or diversify current portfolio positions. Such is especially relevant for family offi ce portfolios that detailed analysis also provides assurance to the family are often unbalanced in risk due to concentrations in offi ce that investment exposures are indeed intended. family businesses.

Across the world, we are seeing increasing need for Finally, raising the overall governance level from the factor analysis among family offi ce clients. Take very outset through strong investment guidelines with the recent case of a Latin American family offi ce clear accountability has been the solution for others. that managed over $500 million, predominantly This process, though involved, ensures all parties comprised of a handful of strategic companies. Their including all third party managers – are in sync from concern was how to design a complementary portfolio the beginning. While the exercise is non-trivial - this without duplicating existing risks. In another case, practice can be supported in a variety of ways through we dissected the investment portfolio of a Northern some tools and capabilities. European family offi ce that managed more than $500 million. Our analysis found that 54% of overall In the end, these developments in managing disparate risk was concentrated on Western European market assets amount to an end state of preparedness. Family returns, despite its initially diversifi ed geographical offi ces want to make informed decisions - with expert appearance. advice that transforms such complexities into simple, digestible solutions. And while no one has a crystal On other occasions, the driver for running factor ball, time and again, we have seen that it is the most analysis is an initial concern regarding a specifi c risk. progressive and adaptive family offi ces that succeed. One family offi ce based in South East Asia expressed concern of interest rate and currency risk within their portfolio. The fi ndings of the analysis led to a “right – sized” solution that was tailored to hedge these particular risks. For these examples and so many more, the family offi ce needs are unique. The challenges they face, however, run in parallel.

Risk Management Takes Disparate Forms Risk management remains a core part of the family offi ce day to day. At this stage in the business cycle

90 WWW.FAMILYOFFICEELITE.COM MASTER BANKER FRANCK MULLER

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91 FAMILY OFFICE ELITE MAGAZINE Adapted from a Holland & catalogue produced between 1910-1912

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93 FAMILY OFFICE ELITE MAGAZINE Private Banking.

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ING Luxembourg, Société Anonyme – 52, route d’Esch, L-2965 Luxembourg – R.C.S. Luxembourg B.6041 AUTHENTICITY IN THE ART MARKET AN IMPORTANT ISSUE THAT MUST ALWAYS BE ADDRESSEDRG Are there more fakes on the art market these days or is it that we are now fl ushing the perpetrators out into the open and becoming cognisant of the scale of the issue? Since Actor Steve Martin bought a fake Campendonk in 2004 from a Parisian dealer, many other works by its notorious forger Wolfgang Beltracchi, not to mention numerous others, are still deemed to be in circulation. Great art market minds have been coming together in the US and Europe to debate how to tackle crime in the art world. This autumn in London alone we witness at least three conferences addressing the idiosyncrasies of trading art and artefacts. Market regulation and bad practice were the subject of September’s Art by: Pandora Mather-Lees, Art Advisor, SIGILLUS Business Conference in Westminster. Then in October Institute exist to protect and validate an artist’s international law fi rm K&L Gates held a seminar solely repertoire, reputation, copyright and moral rights. focused on authenticity and now in December; ‘Fake The committee produces a catalogue raisonné - a or Fortune - On the Issue of Forgery of Russian Avant- comprehensive listing of the approved and known works garde Art’ takes place at the GRAD cultural space in by an artist. While this assists buyers to purchase works Fitzrovia. offi cially recorded as authentic, the art world is full of petty issues, protectiveness and professional jealousies The Guardian back in February 2014 suggested that that can lead to works not being included that should 90% of the works on the Russian Art Market are be. Von Brühl argues, that the offi cial compilation, forgeries. This is a staggering fi gure by any standards, traditionally a printed publication, is deemed to be and the art market needs to address the problem of defi nitive, yet it should have the fl exibility to reject how to verify what is passing hands as more serious or accept new additions - the solution being an online collectors, often across a chain of sale, suff er from dire database. ‘Getting In’ to the book is so very critical to fi nancial consequences and tarnished portfolios. selling a work at the right price that authors can be It is a market full of intermediaries, often trading across liable for prosecution if they do not publish a work borders with anonymous clients. Handling stolen, fake that is, by many accounts, considered an original. The or suspect artefacts is often not deliberate and a dealer French Supreme Court ruled in an appeal, ordering the can unwittingly be an arbiter of bad practice and could Wildenstein Institute to accept a Kees van Dongen to be prosecuted for fraud in the worst case scenario. the offi cial list. Its argument? Failure to do so would Berlin lawyer Frederike Gräfi n von Brühl pulled no have a signifi cant impact on the work’s marketability punches when she opened the K&L Gates’ debate for the owner. with the pertinent question “Who will supervise the supervisors?” There is nothing to stop a self- On the fl ip side, authentication committees don’t have appointed committee setting up to authenticate an it easy. Legal costs can escalate out of all proportion, artist’s oeuvre and some boards have comprised and they have been sued and ‘coerced’ into making questionable or compromised offi cials. As a result, positive statements about a work of art they genuinely hapless buyers have been fooled by sham certifi cates have doubts about. The Pollock-Krasner board was validating fake artworks. Even where genuine, the so- even shut down, bankrupted, over a law suit about a called committees of experts can also be a law unto disputed work. Equally there are cases where artists, themselves. Foundations such as the Wildenstein Picasso included, leveraging ‘Doit d’auteur’, their Moral

95 FAMILY OFFICE ELITE MAGAZINE Right, have disavowed genuine works. The auctions own when a scientifi c examination is carried out in houses tend to come under a lot of scrutiny here conjunction with applied historical expertise with their because of the public nature of their activities, the large resident art historians. numbers of works of art passing under the gavel and the soaring values which result in higher stakes when a Are there other ways to verify what you are buying forgery surfaces. At the Authenticity debate, Sotheby’s at auction or from your trusted dealer? Not for Cecilia Fletcher suggested that the criticism frequently existing works on the market, however Aris Title levelled at Auction houses trading in these works is insurance company is sponsoring a novel technology unfair. Their experts carry out careful due diligence, that can be embedded into a painting in the form of based on years of experience in specifi c fi elds and go a scannable label that will verify the owner and the out of their way to verify the artefacts they take on work. The somewhat unwieldy named ‘Global Center board. How rigorous is this ‘due diligence’ in practice, of Innovation for i2M Standards’ is doing for art what however? Sarah Charles, Senior Legal Counsel with companies such as Spectra Systems does for the luxury Christie’s, says that they typically take three steps. The goods industry – fi ghting fraud with complex technical fi rst is basic connoisseurship using the appraisers and innovation. The organisation is working globally and experts in the appropriate departments and second already has early adopters for its solutions. While one there is the careful verifi cation of provenance and imagines that any ‘unbreakable code’ will eventually associated documentation. Finally, scientifi c analysis be cracked by hackers, Aris CEO Lawrence Schindler is carried out. makes a strong case for the robust nature of i2M and such a measure, when supported by an industry with a This form of materials analysis is now becoming serious problem that inhibits its ability to trade, must more accurate and also cost eff ective. Science is now surely be applauded. enabling buyers and sellers to have more confi dence in trading art as techniques improve. It can rule out the There is an analogy here with house insurance. possibility of a work being a forgery and is a critical Properties with alarm systems pay lower premiums part of the due diligence loop. Laboratories such as and are less at risk from burglary. Leaving one’s door Art Analysis & Research run by Nicholas Eastaugh, the unlocked altogether is plain stupidity and prevention scientist famous for nailing Beltracchi, have a suite of is better than doing nothing. A system like i2M needs forensic gadgets at their disposal that would not be out to become industry standard throughout the world and of place in a James Bond fi lm. These tools include bought into by all the various stakeholders to succeed highly sophisticated digital X-ray, UV and infra-red and that is a tough call, so the market will be following analyses, deep specialised imaging and microscopy. its developments. This is all good stuff and helps to eliminate doubt, but what if a client taking a highly prized Rembrandt Meanwhile back to Russia and the fi nal word on to market doesn’t want to know the truth in case the the value of these public symposia from Natasha work, which he paid millions for, turns out not to be Butterwick Director of Butterwick Russian Art Gallery. worth the canvas it is painted on? Nicholas Eastaugh Natasha and James Butterwick have been fi ghting for says, “We believe scientifi c analysis in combination transparency in a world of pandemic corruption which with a comprehensive understanding of artist’s use of goes back as far as the Cold War when many works with material represents the future of due diligence in the murky provenance were smuggled into the West: “The art market and demand for it is expanding rapidly. That very public battle against Russian fakes and especially is why we are investing in our capabilities to stay ahead those who provide these second rate paintings with of forgers while expanding both our geographical certifi cates of authenticity is reaching its apogee – reach and the talent in our C-suite” Generally this kind reports of arrest warrants soon should become public of intricate detective work can be applied to works on knowledge. Such conferences are a vital cog in the paper, canvas, sculpture, ceramics and of course wood machine to fi nally bring this absurdity into a wider with radiocarbon dating. AA&R claims the science domain.” has limited value in isolation; it really comes into its

96 WWW.FAMILYOFFICEELITE.COM SCIENTIFIC EVIDENCE Reveals Art forgeries in Geneva, Switzerland Kilian Anheuser: Executive director, Head scientist FAEI - Fine Arts Expert Institute

Today art forgery scandals With 20 years experience, Dr To address specifi c questions regularly fi ll the news as paintings Kilian Anheuser, FAEI’s Director other techniques may be used, and other works of art are taking and head scientist says, “Our team for example, to identify modern on an increasingly important role of specialist scientists, paintings industrial organic pigments as an alternative investment. In conservators and art historians introduced to paint formulations a market where traditional art search for inconsistencies in a at more recent dates. This historians alone can no longer painting. We always start with type of examination requires a guarantee authenticity, science a thorough visual examination micro sample measuring a few comes to the rescue. At Geneva of all the elements that make tenths of a millimeter, taken Freeport, FAEI – Fine Arts Expert up a painting: stretcher, canvas, with the tip of a scalpel under Institute (www.faei.org) in painting ground, the diff erent a microscope. The sample is partnership with SGS Art Services paint layers, and fi nally the varnish. then analysed using state-of- (http://www.sgs.com/en/Arts-and- To us, the back of the painting is the-art analytical instruments. Culture.aspx) provide scientifi c just as important as the front.” authentication services for Following the examination, the paintings and other works of art. Imaging in infrared and ultraviolet client will receive a report verifying light will reveal the artist’s whether the artist’s materials Scientifi c examination of works of original underdrawing and recent and working practices match art began in the 1960s in museums restorations. X-radiography authentic references or if there are and other learned institutions. reveals concealed damages as signifi cant diff erences. Also, it will For many years, these services well as the artist’s handwriting. demonstrate to what extent the remained primarily a subject of These examinations are non- painting has been restored. Sandra academic interest with studies invasive and provide important Mottaz, paintings conservator at restricted to museum paintings. information to distinguish FAEI, confi rms, “The latter is an However, in recent years new between an original and an ancient extremely important element services tailored to private clients or recent copy. Valeria Ciocan, not only for the collector and are off ered by independent an imaging specialist at SGS Art indeed any person appreciating laboratories that benefi t from Services adds, “It is fascinating a work of art, but it also carries an extensive range of specialist to be the fi rst person after the important implications for its reference data gathered over the artist to see the original drawing valuation.” Jacqueline Couvert, years by academic institutions beneath a painting, a design a senior scientist at FAEI, sums it worldwide on many of the well- that takes us back to the very up, “Around 80% of the paintings known artists from all periods. moment of creative inspiration.” that we examine turn out not to

97 FAMILY OFFICE ELITE MAGAZINE be the work they were taken for when they were purchased by their current owners. This does not necessarily mean they are forgeries, they may for example also be high-quality historic copies. For many centuries, artists learnt their trade by copying old master paintings. The resulting works often have become collectibles in their own right. However, at FAEI we believe that the owner has the right to know, as well as his insurer or a potential buyer.” There are positive surprises too, for example when an elaborate underdrawing is indicative of an original design rather than a second version or a copy.

As works of art are highly individual objects, the scientifi c approach has to take into account the period, the presumed artist, the technique and other features. Dr Isabelle Santoro, scientist and project coordinator at FAEI, explains, “FAEI will issue a detailed quotation, free of charge, on the basis of a short questionnaire fi lled in by the client, and of photographs of the painting in question. All information remains fully confi dential.” As some of the analytical equipment is portable, certain investigations can also be carried out on the client’s premises.

Conveniently situated inside Geneva Freeport, a hub of the international art market, the laboratory serves a variety of clients, ranging from private collectors to art dealers, insurance companies or professional investors who require scientifi c expertise as part of their due diligence procedures. Yan Walther, Managing Director of SGS Art Services, points out, “Owners of paintings often come to see us only when doubts have already arisen about their works. In order to avoid undesirable situations we highly recommend that a condition report and a technical examination should be a standard element in any pre-sales procedure similar to a home survey or a technical inspection before the acquisition of a vintage motor car.”

98 WWW.FAMILYOFFICEELITE.COM CANNES COLLECTION ALL YOUR HEART DESIRESG

Cannes Collection is a brand new show, debuting in Eric de Saintdo, former organizer of the Cannes June 2016, conceived by friends and collaborators Yacht Show. Bertrand Foäche and Eric de Saintdo, both renowned Michel de Rohozinski, President of Azur Hélicoptères. for putting on international shows such as Première La Squadra, Agency specialists in experiential car Classe, Who’s Next, Fame and the Cannes Boat & marketing who manage all test drives during « Le Yacht Show. Mondial de l’Automobile » in Paris. Romain Réa, Horology expert, retained by the auction Cannes Collection is based on evolving notions of house Artcurial. luxury and hopes to inspire and delight a discerning, global clientele who seek convenience, speed A visit to Cannes Collection promises to be a truly and service as well as world-class quality and unforgettable experience with the opportunity to try performance. many of the fabulous items showcased. Sail a yacht out into the Bay of Cannes and see how she performs Here you will fi nd yachts from 20m to 60m, private on the open water or take a beautiful car for a spin planes, helicopters, prestige cars and motorcycles, with an experienced driver at your side. Take a trip art, property, travel, objets d’art and more…a selection over the old town of Cannes in a helicopter or peruse of the very best brands and fi nest products carefully impeccable timepieces and stunning contemporary curated in one of the worlds most beautiful cities. art in one of the modern pavilions. A number of auctions of exceptional and rare pieces will be held Held from June 2nd to 5th, Cannes Collection is during the show culminating with a charity dinner scheduled to run immediately after the famous in support of The Womanity Foundation, created Cannes fi lm festival and the Monaco Grand Prix, two and chaired by Yann Borgstedt, whose mission is to landmark events that draw the eyes of the watching improve the access to quality education, training and world and which, for many visitors to the Riviera, empowerment for disadvantaged girls and women. represent the beginning of the Summer Season. The Old Port of Cannes, one of the most beautiful In fact, everything at Cannes Collection will be Mediterranean ports, will host CANNES COLLECTION, available to try and to buy, lease or order right away thanks to the commitment and confi dence of the to enjoy over the coming summer. A concept summed City of Cannes and the Nice-Côte d’Azur Chamber of up in the show’s rallying cry – ‘WANT IT NOW? HAVE Commerce and Industry. The perfect showcase for IT NOW!’ hosting this new event, the strategic location of the port facilitates the display of prestige automobiles Cannes Collection will be held around the famous and motorcycles, helicopters and private jets around Old Port in Cannes, a unique and iconic location in an extraordinary selection of yachts up to 60 metres a city that already hosts some of the most important long. shows in the world, boasting as it does a beautiful harbour and bay, fantastic hotels, restaurants, bars Cannes Collection runs from June 2nd to June 5th and nightlife. At the show itself, an exclusive network 2016. Further information is available at of sector experts and specialists will be on-hand to off er advice and insight including: www.cannes-collection.com

99 FAMILY OFFICE ELITE MAGAZINE

IMPACT AND PHILANTHROPY by Christopher Carnie and Wolfgang Hafenmayer

There is a Babel of new terminology in philanthropy. We six reasons for the growing interest in impact: talk about ‘impact investing’, ‘social enterprises’, ‘Social • A new generation of philanthropists, with new Impact Bonds’, ‘soft loans’, ‘patient capital’, ‘quasi- demands equity’ and ‘crowdfunding’. We talk about ‘Programme • Growing professionalism in the philanthropic and Related Investment’ or ‘Mission Related Investment’ non-profi t sectors and ‘philanthropic banks’ (an apparent oxymoron, • A search for sustainability in investments until one, realises that these are foundations acting as • The identifi cation of signifi cant social and ‘philanthropic banks.’) environmental problems, and opportunities • The entry of foundations These and a range of other terms have been created by o As grant-makers interested in impact the new professionals operating in the non-profi t space. o As investors interested in impact This is a fl owering of new, or substantially recycled, tools • The potential for catalysing system change, by for philanthropy designed to meet the needs of the new demonstrating impact generation of philanthropists and their advisers. NEW GENERATION, NEW IMPACTS IMPACT ‘Some people say that venture philanthropy started in ‘Impact’ is the theme of many, perhaps most, of the the 1960s,’ says Wolfgang Hafenmayer, Head of Societal conversations that one has with philanthropists. It is Impact Advisory at Trusted Family, ‘but it only really used in a number of ways, with a range of meanings. took off in the 2000s when business people came into Impact is used to mean ‘a measurable change in society the sector. They brought their business mind-set, that or in the environment,’ normally with the implication of people who had made a lot of money quickly. The that this is a change for the better. It is linked to the word impact investing fi eld emerged here. They focused on ‘investment’ to mean ‘an investment that brings both organisations that could link making money and doing fi nancial change and social or environmental change’ good.’ This link is present, says Wolfgang, in all asset with, again, the hoped-for changes being positive. classes; ‘in all of them you could fi nd ways of making a positive impact.’ Why do we hear so much about impact? Interviews and research conducted for a forthcoming book authored by Judith Symonds, a consultant in philanthropy, strategic Christopher Carnie “Uncovering Philanthropy in Europe: planning, and public aff airs, says that ‘the younger A practical guide” (Policy Press, 2017) suggest at least generation want to be certain to have an impact, and

101 FAMILY OFFICE ELITE MAGAZINE to control where their money goes.’ These ideas were diffi culties and contradictions inherent in measuring underlined by a Dutch philanthropist and social investor philanthropy; ‘There is a real demand [amongst interviewed for the book, who said that ‘social impact is philanthropists] to understand impact. They are used to new for our family. It combines two things - doing good, working with KPIs [Key Performance Indicators]. When and you can reuse money multiple times. We are an [the foundation board] interviewed me [for this job] entrepreneurial family, so we like the entrepreneurial they asked me about KPIs. I said that the foundation logic, the discipline, and rigour. With a social impact was working with complex social and/or cultural issues approach, you become co-owner rather than just which are not always measurable in the way that an donor’. But there are nuances, and this philanthropist industrial product can be measured. Measuring social is not solely interested in impact; his motivations mix impact needs a long-term vision that is not always giving with the measures of effi ciency that impact compatible with short-term projects.’ off ers. ‘Social impact is a complement to [traditional] donations. We have been an impact-fi rst social investor INVESTMENT, SUSTAINABILITY, AND IMPACT for a long time.’ Impact is part of a convergence of ideas. It has emerged as the basis for a class of investment. Investment IMPACT, THE PROFESSIONAL APPROACH with impact – that creates both fi nancial and social or Impact could be a way of expressing your professional environmental value – is a fast growing class of assets. status – ‘professionalism through impact measurement’ The annual J.P. Morgan/Global Impact Investing Network as Serge Raicher, co-founder of EVPA expresses it. (GIIN) survey of the sector for 2015 (Saltuk, 2015) reports a 7% growth in capital committed between Funders, fundraisers, and staff in the fi eld have ‘become 2013-2014 and a 13% growth in the number of deals, more professional,’ says Arnout Mertens, General with survey respondents managing a total of US$60 Director of Support Services at Salvatorian Fathers and billion in impact investments. Brothers in Rome. ‘We are moving away from charity to impact. Governments are imposing more stringent Through the growth of impact investments more and rules. They don’t fund without a needs assessment, more people were arguing that every investment has and if we don’t have a fi nancial [management] manual an impact, the only questions are weather this impact in place then the project does not get the grant. We is positive or negative. And many people would argue need three quotes for bills of quantity - in places where today that we are at a point in human history, where we even basic literacy may be a problem. There are visits cannot aff ord more investments with negative impact. from funding organisations, fi nancial audits… There has been a signifi cant change in funder attitudes over the FOUNDATIONS OF IMPACT past two years.’ Arnout debates the practicality of all Foundations in Europe seek impact in their grant- of this. Salvatorian Fathers and Brothers work in what making, but they are increasingly also seeking it in he describes as ‘forgotten places’ – the lost villages of their investments. This is a radical departure for a the Global South. Data gathering, reliable monitoring, foundation sector in Europe that has, for years, focused long-term impact evaluation are all very hard to achieve only on the fi nancial, and not on the social returns from when there is no electrical power, no or few literate its investments. That requirement was laid down in adults and the constant threat of natural or human regulations – until 2011, for example, the UK Charity disaster. Commission guidance to trustees was to maximise fi nancial returns. In that year, the Commission issued That view is seconded by Marie-Stéphane Maradeix, new guidelines ‘on investments that help the charity CEO (Déléguée générale) of the Fondation Daniel et to achieve its mission where this has no signifi cant Nina Carasso, a philanthropic foundation based in Paris fi nancial detriment (mission related investment)’. This and Madrid which derives from the family that owned new guidance allowed foundations in the UK to make Danone, the dairy foods company. She illustrates the impact investments. As is often the case, the US had

102 WWW.FAMILYOFFICEELITE.COM been there before; in his 2016 book on the impact consultancy on philanthropy and non-profi ts. He is a economy, Dr Maximilian Martin (Martin, 2016) reminds researcher, consultant, and trainer in philanthropy. His us that ‘the Ford Foundation pioneered PRI [Programme book, “Uncovering Philanthropy in Europe: A practical Related Investment] in 1968.’ guide” will be published by Policy Press http://www. Philanthropic foundations can provide the fi rst fi nance policypress.co.uk/ in January 2017. that leads to a social enterprise being created; the www.factary.com grant that funds research, or the zero-cost loan that buys a fi rst vehicle or building for a project. Because Wolfgang Hafenmayer oversees the Societal impact foundations are not beholden to shareholders, they solutions for Business Owning Families at Trusted can aff ord to take on projects that off er no return, or a Family. loss. This is the idea of ‘de-risking’, where a foundation accepts the highest risk tranche of a loan or investment Before this, Wolfgang built LGT Venture Philanthropy in order to reduce the risks for other investors, and thus from scratch to a recognized global leader in impact to encourage them to join the loan or investment. investing. Having started with the support of the Princely Family of Liechtenstein, Wolfgang’s global BACK TO PHILANTHROPY team of investment managers and impact investing ‘In no basic defi nition of philanthropy does it say that you advisors took care of a signifi cant number of families cannot get anything back,’ says. Wolfgang Hafenmayer. spread over fi ve continents. Before starting LGT ‘Sometimes doing good means being tough and saying Venture Philanthropy (2007), Wolfgang gained rich “I want something back”.’ experience in the industry as an investment manager with BonVenture. He also helped set up Forma Futura, REFERENCES a sustainable asset management company. Previously, Martin, M., 2016. Building the Impact Economy, Cham: he was the executive director of Consileon and also Springer International Publishing. Available at: http:// worked for Bain & Company. link.springer.com/10.1007/978-3-319-25604-7 [Accessed December 4, 2015]. Wolfgang is a well sought-after speaker in his domain Saltuk, Y. et al., 2015. Eyes on the Horizon: The Impact of expertise. For his book “The Future Makers”, he Investor Survey, London: J P Morgan. Available at: www. interviewed 230 social entrepreneurs, politicians and thegiin.org [Accessed February 15, 2016]. scientists in 26 countries.

ABOUT THE AUTHORS: www.trustedfamily.net Chris Carnie is founder of www.factary.com, a

103 FAMILY OFFICE ELITE MAGAZINE

BNY MELLON The Softer Side of the Evolving Canadian Family Offi ce

Trevor Hunt Anthony J. Messina

The concept of a single family offi ce or multi-family are fundamentally, but not always, dependent on size. offi ce is fairly new to Canada compared with Europe Substantially larger family offi ces (over $500 million in and the United States. However, particularly since assets) can attract talent which can make it economically 2008, there have been an increasing number of family advantageous to carry out a full-spectrum service whilst offi ces that have been created upon liquidity events. others may benefi t from leveraging resources and This is typically a result of family assets having grown intellectual capital collectively. The latter describes a considerably and required specialised expertise or due multi-family offi ce approach. to fi rst generation family members facing progressively more complexities and embracing sustainable wealth Putting the investment related activities aside, we are transfer to the next generation and beyond. Signifi cant noticing an escalating demand for what some refer to as Canadian families have accumulated wealth through the “softer issues” within the family offi ce environment. various industries, although, predictably, these have often been concentrated within commodities, real These responsibilities may include: estate and infrastructure, and to a lesser extent, 1. Family governance – Most of us have heard of the technology. Given that our fi rm’s approach here in shirtsleeves to shirtsleevestsleeves phenomenphenomenon whereby the Canada is most similar to that off the investminvestment arm wealth that hasas beenen created by the fi rst generationgeneratio of a multi-family offi ce, we fully appreciateppreciate that no two is signisig fi cantlyntly diminisheddi nished if not decimated by the families and no two family offi ces are alike. On a case- third generation.neration. Familymily governance formalises the by-case basis there should be suffi cient fl exibility in processpro ess for preparipreparing the family to receive the wealth, deciding which functions are best servicederviced in-house by ratherther than merely gettingetting the money ready for the the family offi ces versus those servicesvices which should family. The fi rst step ste in this process is establishing be out sourced, to ultimately maximiseimise effi cienciescienc s open communicationscommunicatio and trust within and across and quality of services for the family.y. These decdecisionsions generations. A family offi ce can play a key role here, in

105105 FAMILY OFFICE ELITE MAGAZINE convening family “get togethers”. These may start by in Canada has given rise to peer group networking being purely social gatherings and gradually progress amongst affl uent families who share with each other to include more formal discussions and exercises. the challenges and the successes of operating a family This could encompass collaboratively establishing a offi ce in order to establish the optimal practices that family mission statement, deciding on a family vision may be followed. For instance, earlier this month, one based on shared core values, and designing a code of of the senior members of our team attended a private conduct for future meetings. As the family grows in family offi ce conference in the remote location of Banff numbers and wealth, this often also includes defi ning in Alberta. The audience included family members roles and responsibilities, possibly codifi ed in a family and their advisors from around the country with constitution. representatives from Vancouver, Edmonton, Calgary, Toronto and Montreal. The agenda, for the most part, 2. Education – A key early step in preparing addressed these softer issues with an emphasis on families for their inheritance is educating the people within the family offi ce, family dynamics, benefi ciaries so they become better stewards of their governance and education. “By coming together future wealth. This can start with basic instruction on in a forum such as this, families and their advisors diff erent types of investments and does not stop at can learn from each other to a. mitigate potential asset allocation and investment policy knowledge. It pitfalls and b. uncover any hidden opportunities, to should however include: how to select an investment eff ectively execute best practices.” Said Trevor Hunt, manager, that is, both quantitative and qualitative Wealth Director at BNY Mellon Wealth Management in criteria with arguably a greater emphasis on the latter. Toronto. One facet to be stressed is a deeper understanding of the motivations driving an investment manager’s Although the fi nancial assets of the family offi ce decisions. This can be achieved through asking the may seem paramount, successful multi-generational right questions e.g. how is the investment manager families have demonstrated the value of developing compensated? Does he/she have any of their own human and intellectual capital as well. The softer wealth invested in the underlying strategy? If so, what issues cannot be ignored and are increasingly a focal percentage of their own wealth is invested alongside point for family offi ces across the country. This is an their investors? area where leadership from a single or multi-family offi ce can be a major plus. 3. Philanthropy – Many fi nancially successful Canadian families are generous and philanthropy is Anthony J. Messina is the President of BNY Mellon one area that is relatively easy for the entire family Wealth Management based in Toronto. The Canadian to be able to participate in. While it’s nice to give business advises on nearly $5bn in assets primarily family members the chance to allocate some of their through third party investment managers and charitable gifts to their own favourite causes, we have predominantly for signifi cant Canadian families in observed that families benefi t on many levels when addition to institutions. they dedicate at least a portion of their donations www.bnymellonwealthadvisory.ca to “family philanthropy”. By making a collective decision to contribute to a specifi c cause or causes that refl ect the family’s values, multiple generations participate in joint decision making in a feel good, nonthreatening way. If used correctly, philanthropy can be an eff ective tool for evaluating diff ering family members’ communication styles and assist in nurturing decision making capabilities within families and across generations. Like other regions, the evolution of family offi ces

106 WWW.FAMILYOFFICEELITE.COM Alternative Risk Management for Family Offi ces by Dennis M Govan

Whether its a Single or Multi- commentary. Therefore, in this classes and several policies. Even Family Offi ce, the challenges and article, I will concentrate on the if the family/FO has worked with demands in meeting your client’s wider subject of risk management ‘trusted’ brokers for many years, needs, objectives and expectations and especially the use of insurance the lack of transparency in the are huge. Each family has its own to cover other asset classes and level of brokerage commission can priorities depending upon the risks. be an issue. Do you know if you are evolutionary stage of the family paying 5 percent or 40 percent? offi ce, family culture, values, As families evolve and invest more demographics, size, age, education, into custom and multiple homes, Families with substantial assets ambitions and other factors. fi ne art, collectables, jewellery, who insure their homes, yachts yachts, aircraft, and car collections, and valuable collections through Since the fi nancial crisis of 2008- whether this is for purely personal these traditional brokers or agents 09, it has become obvious that enjoyment or investment and with some of the better- robust risk management is a crucial diversifi cation, there is nevertheless known market carriers, frequently service that Family Offi ces (FOs) an increased need to consider how overpay for protection that still must provide for their clients. With to protect the real value of these leaves them exposed to signifi cant this said, from discussions with FOs, assets. The heightened threat fi nancial loss. Trustees, and other professionals of Cyber-attack and Kidnap and together with various surveys on Ransom must also be given serious Furthermore, the diversity this subject, it would seem that consideration. of the risk exposures for the many FOs unfortunately still fall extended family often tends to short in this regard. Recently introduced and proposed be overlooked with the insurance UK tax changes in respect of program focused only on the While most FOs do of course have domicile and UK residential needs of the patriarch/matriarch. specialist investment portfolio property, including potential IHT, It is not uncommon for families risk analysis, measurement create additional challenges and to view the cost of insurance and reporting capabilities and insurance considerations. It is, prohibitive and rather run the risk tools; they typically do not have therefore, imperative that the proper of loss, believing that this is ‘self- comprehensive risk management attention is given to the assessment insurance,’ which it is certainly not! processes and policies in place that of current insurance requirements, There are, however, alternatives cover many of the other inherent adequacy of existing policies, that can achieve signifi cant cost risks experienced by families and security options, contingencies and savings and fl exibility in cover. their businesses. of course what happens if you have The Alternatives to make a claim. The recent investment market Stand Alone Captive Insurer volatility continues to highlight the Traditional Insurance A ‘captive’ insurance company is importance of appropriate portfolio Insurance coverage for a FO is not eff ectively an ‘in-house’ insurance strategies, tactical allocations, a simple single product. In many provider formed primarily to and regular reassessment and has cases, the FOs have multiple brokers insure its owner and can be viewed already had extensive industry or agents covering diff erent asset as a form of ‘self-insurance’.

107 FAMILY OFFICE ELITE MAGAZINE The use of a captive insurance company can result requirements. The same Cell can be used for several in a meaningful reduction in overall insurance costs, categories of insurance. This ‘bundling’ of risks into improved risk management, effi cient administration, a single policy can signifi cantly ease the burden of and potential tax benefi ts in some cases. administration and benefi t from the PCC Core’s overall reinsurance market pricing and reduced brokerage. However, the high operating costs and regulatory However, if preferred or volume and value justify the challenges of running you’re own stand-alone captive business case, individual Cells can be used for diff erent insurer have meant that captives have typically been categories of insurance. the reserve of major corporations only. A Cell must meet specifi c solvency requirements An alternative structure used by many SMEs, providing based on the risks underwritten and any risk retained very similar benefi ts but at a substantially lower cost is within the Cell. The owner, therefore, has the ability a ‘rent-a-captive’ off ered by an insurance protected cell to fund any smaller losses from the capital of the Cell, company (PCC) or Segregated Account Company (SAC) which can accumulate over time from the savings or Segregated Portfolio Company (SPC), depending due to the lower costs of re-insurance. Typically, the upon jurisdiction and relevant legal framework. owner will continue to pay premiums at the same level as previously, especially if this is tax deductible, There are some subtle diff erences between PCCs, but as the costs of the re-insurance is lower than the SACs, SPCs, but in essence, all have accounts (cells) current premiums, this creates the surplus within the containing assets and liabilities that are legally Cell. The greater the amount of the smaller claims the separated from the assets and liabilities of the owner is prepared to self-fund, the greater the savings company’s ordinary account. For the purpose of this as insurance companies penalise clients that make article, and my preference, I will concentrate on the smaller claims. Guernsey Insurance PCC. The Cell owner can decide to reinsure all the risks A PCC Cell rather than self-funding the smaller claims. The Cell Guernsey pioneered the introduction of the PCC is thus used for re-insurance arbitrage to benefi t from for insurance companies in 1997 and is Europe’s the lower insurance premiums available from the re- leading captive insurance domicile with more than insurance market. If no risk is retained in the Cell, 800 international insurance entities, of which 444 there is no minimum capital requirement at Cell level. are PCC cells. Approximately 40 percent of FTSE 100 companies have captives in Guernsey.

The structure consists of a ‘Core’, which has an insurance license granted by the Guernsey Financial Services Commission ‘GFSC’. The Core can issue an indefi nite number of Cells which are separately approved and licensed by the GFSC to provide captive insurance to the owners of the individual Cells. As each cell is legally segregated, it has its own assets and liabilities and the balance sheet of one cell cannot be co-mingled or used to meet the liabilities of another. The physical assets are not held in the Cell. Each Cell is independently audited with no consolidated reporting at Core level.

Each Cell has its own captive insurance programme that is tailored to meet the owner’s individual

108 WWW.SATOCONSULTANTS.COM Flymenow

Fine Dining Soaring at 30,000ft Enhancing the Charter Catering Experience is on the Menu

Plane food doesn’t have a great change at 30,000ft, suggesting reputation – in fact; it’s so bad the food is unappetising and many people simply refuse to bland. While this may be of eat the meals that are served on little comfort to commercial fl ights by the cabin crew. passengers, for those in the private charter industry, there Recent fi ndings have tried to continues to be an increase in off er answers as to why plane scrutiny of what culinary delights food is viewed so negatively and are available on board. propose that perhaps it’s not the airline’s fault. Cornell University Andrew Whitney, commercial indicated the noisy atmosphere director at private jet and in the cabin can actually change helicopter charter company, the taste of food while scientists FlyMeNow, reports that a stark at Oxford University believe our trend is emerging among clients. Andrew Whitney taste buds and sense of smell More and more, consumers are FlyMeNow Founder

109 FAMILY OFFICE ELITE MAGAZINE demanding the very best for their money – from fl ights that can incorporate up to two or three aircraft to staff to destinations – everything is stops in a day. under the microscope, especially the food that is “We also provide fi ne dining for larger charter jets being served on-board. carrying passengers on long-haul trips.” He said: “Research into plane food always sparks interesting debate and the topic is always on our Passengers can enjoy options including Kopi minds at FlyMeNow. We provide clients with the Luwak Coff ee - renowned as the world’s option of a private jet charter around the globe, most expensive coff ee - unique cocktails and so our client base is extremely diverse, with a mix personalised tasting menus. Chefs can also be of nationalities and backgrounds frequently fl ying provided on board wide body jets. They also with us. recently introduced an exclusive, free training service for fl ight attendants, teaching techniques “This is why it’s important thattha every fl ight is and skillskills requirequired to deliver fi ne food at altitude. personal and is tailoredored to their exact requirequirements – we regularly receiveive requests for food and ddrink But whathat about the research intoint the taste of food, which means it’s imperativemperative that our off eringer g is 30,000ft30,0 0ft up in the sky? Daniel said: “We can’t do of the highest standard.”dard.” In its eff ort to enhancenhance anythingany ng about the changes to people’s taste budsbud the service, FlyMeNow’seNow’s catering companyompany of whilewhi they are travelling. But what we can do is choice is On Air Dining,ining, pioneepioneers in the private ensureensu the food we are off ering is of the highehighest charter catering industrydustry for a number of years. standard,stan rd, and that is our constant challenge.challenge With Daniel Hulme, CEO, aat the helm, it constantly revolutionises its menu to meet all the current He continued:ntinued: “We live in the worldw where demands of the client, while keeping an eye on everythingevery ing is instant. TechnologTechnology has developed upcoming trends andd client eexpectations.ectations. to theth point that anything wew want or need is at the clickc k of a button. We want things now which Andrew added: “On Air Dining is very focused on is whywh we are seeing a growing demand from our providing the best clientent experience, and we shareshar clients too off er ononly the best because they know that vision. What Danielniel and his team are doingdo they cann shop around. “The end to end service is the best in in-fl ightht dining and that exexpertise has to be on point and to ensure every aspect of complements our service.”rvice.” Daniel laulaunched and the fl ight is the best it can be. We want to make revamped On Air Diningning in early 2014 and is the experience as pleasant and memorable as regarded in the industrystry as aan in-fl ight cuisine possible for our passengers.” expert. He said: “At On AAir Dining we believe the catering service can make or break a fl ight Andrew agrees, adding: “The private aviation experience, so we have gone to great lengths industry is growing at a rapid rate and continues to deliver a food service that incorporates food to increase in strength as we move through trends, associated with elite restaurants, and take 2015. If operators want to stay at the top of their them into the air. game, they need to be looking at their onboard experience and seeing what they can improve. “The in-fl ight dining experience we can provide varies according to the mission type. For example, “Consumers’ demands are changing, they want we have specially devised menu boxes that are more and it’s our job not only to meet that specifi cally for the short haul, or for round robin expectation but also give them value for money.”

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There is a growing recognition that sometimes not. Family offi ces are for wealth to be sustained over typically dedicated to providing several generations, collaboration professional and personal duties and good communication is for the family. They centralize the required between family members. execution of investment strategy, This lessens the potential tax services, insurance planning, impact of family disputes, poor philanthropic advice and personal decision-making, unprepared services. heirs and feelings of entitlement. This is especially the case with Given the breadth of the multi-branch families that are institutional level of access and geographically disbursed. This service needed by UHNW and article explores how private banks family offi ces, some of the needs technology solutions to support can be integrated into this process, are outsourced to the larger private consolidated reporting and risk and why is can be advantageous to banks. The demand for outsourcing management. In outsourcing, some do so. is growing rapidly, particularly or all of these areas have a higher amongst a handful of bigger global probability of better transitions A family offi ce architecture has private banks. In particular, the of wealth from generation to three elements: private banks that are succeeding generation – a key advantage, as 1. Size: This is the number of in partnering with UHNW and research has shown that, in 90 family members, the number of family offi ces are those that can percent of cases, family wealth staff and the amount of assets off er a mix of positive investment dissipates by the third generation under management. results, deep intellectual capital, (source: The Williams Group, 2. Complexity: This includes quality research, unique products Raymond James). investment types, number of and dedicated advisory teams generations in the family and legal that can deliver exceptional client A large Private Bank can assist in entity structures. experience and have corporate four main areas: 3. Autonomy: The degree to reputations for ethics and 1. Family mission statement. which professional functions innovation. 2. Investment Strategy. are outsourced, what the typical 3. Governance Structure. professional services are and what While the decision to outsource is 4. Wealth education curriculums. the advantages of outsourcing are fi rstly driven by considerations of if done with private banks. cost, fl exibility and confi dentiality, The family mission statement’s family offi ces typically look to purpose is to assist the family The burdens that come with outsource functions where there in developing and establishing signifi cant wealth can be complex are diseconomies of scale (i.e. too fundamentals for the extended and challenging. This is why much volume), specialized skill family to follow and learn from. The ultra-high net worth (UHNW) needs (e.g. aircraft maintenance, objective of the mission statement individuals and wealthy families estate law), low-cost access to is to defi ne the core purpose of the are creating family offi ces. alternatives like external fi xed family, and in so doing establish a Sometimes, a family offi ce can be income managers and new guiding force for relevance of the separate from the family business; current and future generations. In

113 FAMILY OFFICE ELITE MAGAZINE considering the mission statement in order to achieve strong long- products, and independent advice purpose and objectives, some key term returns. The private bank (i.e. private banks that do not own questions need to be addressed, partner can assist in all areas of a hedge fund manager, do not run such as what the meaning of the process: a private equity business, and the family wealth is and why the 1. Investment policy statement – do not own a fund management family business exists. Ultimately, defi ning objectives, benchmarks, company). In addition, private the family mission statement roles and responsibilities. banks that can off er the family should help to align family core 2. Asset allocation – considering offi ce access to their institutional values and ideals and facilitate potential risks and potential trading platforms should be leadership. These core values rewards across all asset classes preferred. In particular, access should be regularly reviewed and and regions, also taking into to a capital markets platform periodically re-confi rmed. account liquidity and behavioural can off er speedy and effi ciently biases of the family. priced execution with smooth In formulating an investment 3. Portfolio construction – using settlement. Some larger private strategy, the fi rst step is to establish the bank’s research and analytics banks are also able to off er access an investment committee. This capability, establishing minimum to their institutional teams, so involves selecting experienced and maximum exposures by enabling family offi ces to create investment professionals – both asset class and region, as well as uniquely structured hybrids and generalists with broad experience rebalancing rules. Performance customized structured products as well as specialists in key areas reporting - regular in-depth based on objective risk profi ling – and a strong well-respected reporting of performance against and desired outcomes. Chairperson. benchmark and objectives. The investment policy can be The investment committee should If the family offi ce does not need framed by the private bank have no confl icts of interest. Its to outsource all of these elements and needs to consider fi rstly aims should be to formalize the of the investment process, then the investment objectives; investment process, enhance the private bank could undertake for example, how much loss is portfolio strategies, educate a competency risk analysis to acceptable? What is the fi nancial family members, provide a help identify specifi c areas of goal? What is the potential forum for discussion for internal weakness within the family offi ce annual cost of achieving that professionals and formalize the resourcing. With the portfolio goal? Secondly, the investment review process. Its responsibilities construction, in the critical areas philosophy should be considered; include agreeing procedures and a of fund and security selection, the for example, does the family feel decision-making process, writing best partners for family offi ces strongly in favour of an aggressive an investment policy, monitoring are those private banks with trading approach? How much strategic allocation and asset open architecture. In practise, diversifi cation is wanted? How classes, actively reviewing the this means having agnostic many core positions are preferred performance of managers and product selection with objective versus non-core positions? Thirdly, investigating new investment selection based on independent specifi c investment selection alternatives. investment and operational due criteria for funds, stocks and diligence, pricing transparency bonds should be decided. Finally, Of the above, the investment with only one level of fees and monitoring procedures need to be process and investment policy no retrocessions on discretionary established. are critical, and are areas where or advisory mandates, having the the private bank partner can be right incentives with selections These include assessments of how actively involved. based on performance and to monitor, how often to monitor The investment process should be no additional incentives for and how to assess if the portfolio rigorous and consistently applied the salesforce to sell in-house guidelines are being met. Private

114 WWW.FAMILYOFFICEELITE.COM banks can have signifi cant roles to family board, where three to six can encourage information sharing play in helping to develop the right family members with a Chair make within families, using philanthropic governance standards for the family the decision formerly, at least, accounts and foundations for offi ce. There are four components quarterly; outside directors, with exploring investment strategies within a governance system: whom the family board make all and encouraging collaboration, and 1. Constitution - the preservation of the major decisions. Private banks can also provide opportunities for family vision and values. can assist with wealth education. the senior generation to guide the 2. Assembly – recurring meetings This involves implementing family and to share philosophies. and leadership training for the next strategies that provide age/skill/ generation of wealth. interest-appropriate opportunities In summary, the private banks can 3. Council – enhancing strategic to lead, learn, infl uence or grow. help enhance the structure and eff ectiveness by using the expertise This builds family cohesion and governance of a family offi ce, raise of advisory professionals. communication. At the individual the rigour of investment decision- 4. Process – effi cient decision- level, developments can be making and monitoring, help to making and confl ict resolution made in fi nancial independence, build cohesion around the family process. internships, understanding how philosophy and develop the younger credit works and appropriate uses, generation. The larger private There are three key decision encouraging saving and budgeting banks are especially well-placed methods: principal directed, where and understanding the power of to do this, with their institutional one or two key family members compounding. In terms of continuing trading platforms, quality research make all the major decisions; the family legacy, wealth education and capital markets expertise.

115 FAMILY OFFICE ELITE MAGAZINE

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