Having the correct information and advice regarding investments is crucial for professionals in a family office. In addition, family offices have a broad scope and can use different asset classes since they do not regulate the way banks and private equity funds do.
It is vital for a family office to efficiently understand the mandates carried out by the principal and the family to obtain the required legal documents and move forward with investments. However, every family office is unique, and if one fails to follow through with a trust deed or other mandates, they will be accountable to the family. Keeping that in mind, here are some things that family offices need to consider when it comes to investing in post-covid-19 world:
Striving for Good Governance
Sometimes, family office professionals could be at risk of breaching the family’s trust if they fail to follow through with the chosen investment procedure. This may happen if they are in positions of power, such as having fiduciary duties or being an investment advisor.
It is crucial for family offices to practice good governance to prevent breaches of contracts and misunderstandings within the family. Moreover, they should also opt for help from a third party if they require a third person’s perspective on their investment strategy or lack investment capability within the family, thereby balancing external management and in-house strategies.
Reviewing Investment Strategies Post-Covid
The pandemic has affected many family offices’ assets, resulting in their need to evaluate their investment strategies and make the necessary changes to meet the families’ demands. The pandemic can result in low assets, such as the inability to trade due to lockdown procedures and social distancing. Consider how your current strategy will change or work after restrictions are lifted.
Those family offices whose returns are impacted by the covid-19 will need to review their current investment strategies with their family and principal to revisit expectations and demands. If they are facing low asset values, they should also consider restructuring for tax or jurisdiction purposes.
The Dilemma with ESG and Crypto
The pandemic has brought ESG and Crypto into the spotlight. ESG stands for Environmental, Social, Governance and represents investors that are socially responsible. Many families have made ESG a priority and family offices will have to restructure their investment strategies in an environmentally friendly way to meet the policies of ESG.
While most banks have already moved to greener platforms, family offices will soon need to be ready for ESG and may face pressure from the public and possibly the law to make the change.
Crypto assets may conflict with ESG investments according to the current assets, and families may want to switch to Crypto investments in a digital post-pandemic era. However, it is vital for them to consider the environmental impact of Crypto and if it aligns with their current ESG Policies.
‘Proof of work’, the current method on which most blockchains run, pose challenging questions and bring up doubts about it being ESG-friendly. Family offices can move to greener crypto platforms, such as Cardano or wait until blockchains change to greener systems.
‘REGULATORY, ESG AND CRYPTO LEGAL CHECK-LIST FOR FAMILY OFFICES POST-PANDEMIC‘, Campden FB- Charlotte Evans-Tipping, James Brockhurst
