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In simple terms, inflation is the rise in the price of goods and services based on supply-and-demand dynamics that could affect specific goods and services or a broad range thereof.

inflation is caused by a surge in demand for a broad range of goods or services and is often associated with economic expansion or expansionary fiscal policy that boosts employment and wages across the economy. During such times, credit tends to be easier to obtain which avails more funds to consumers, further boosting demand. Also, consumers wary of rising prices may rush to buy products before prices rise further.

inflation occurs when production costs rise due to higher prices of raw materials and wages. Demand for goods is unchanged while the supply drops due to higher production costs. The added costs are passed onto consumers in the form of higher prices of finished goods.

Inflation is not bad news for everyone. For example, the debt service capacity improves for borrowers with fixed-rate debt and growing revenues due to inflation, while the relative return for fixed-rate lenders diminishes. Meanwhile, profitability declines for floating-rate borrowers who cannot pass the higher debt service cost onto their customers.

Relationship between Inflation, Interest Rates and Exchange Rates

Central banks use interest rates to manage inflation. They increase interest rates when inflation is high and reduce them when inflation is low. This, in turn, affects currency exchange rates. Currencies with high interest rates tend to weaken against those with lower interest rates, making imports more expensive and exports cheaper. A weaker exchange rate makes the price of exports more competitive in international trade and attracts foreign investment. This mechanism automatically defends weaker currencies, allowing them to recover over time.

Investors can plan for inflation by investing in asset classes that outperform the market in an inflationary environment. For example, the cash flow from investments in infrastructure and real estate tends to rise with inflation and so does their value. Capital-light businesses, such as technology, media and telecommunication services, whose revenues rise with inflation are also winners in an inflationary environment. Similarly, investments in floating-rate debt feature greater protection as their returns are indexed to inflation.

The Role of Wealth Managers in an Inflationary Environment

Historically, commodities (e.g., gold) and other real assets (real estate and infrastructure) were considered good hedges against inflation. Moderate inflation also tends to benefit stocks.

Equity real estate investment trusts (REITs)

, for example, outperformed the broad market 67% of the time with an average inflation-adjusted return of 4.7%.

Such strategies worked under the prevailing conditions at the time but may no longer be suitable in the current environment. The right wealth manager can help you design an investment strategy within your appetite that protects your wealth against inflation and produces above-average returns.

The Family Office to learn more about inflation-proof investment solutions that protect and grow your wealth.

https://www.imf.org/en/Publications/WEO/Issues/2021/07/27/world-economic-outlook-update-july-2021

https://www.schroders.com/en/insights/economics/which-equity-sectors-can-combat-higher-inflation/

The investment community is divided on whether inflation is more than just transitory. According to its latest World Economic Outlook Update, the International Monetary Fund expects inflation to return to its pre-pandemic ranges in most countries in 2022,[1] but uncertainty remains high. How can investors mitigate inflation risks, and what is the role of wealth managers in such an environment?

Protecting Wealth From Inflation

Meanwhile, higher energy prices direct large amounts of capital to the Gulf Cooperation Council (GCC) states, where economic growth is linked largely to the price of hydrocarbons. This increase in wealth represents a major boost for the region’s economy and investment community.

What does this mean for high-net-worth individuals seeking opportunities in a looming bear market?

The International Monetary Fund (IMF) predicted recently that market conditions could boost oil revenues in the Middle East as a whole could by $1.3 trillion, leading to a doubling of economic growth in the GCC from 2.7% in 2021 to 6.4% this year.

Along with its significant share of global oil and gas exports, GCC also hosts some of the world’s largest sovereign wealth funds (SWFs), including Saudi Arabia’s Public Investment Fund (PIF) and the Abu Dhabi Investment Authority.

These funds have been active during previous major downturns, such as the Global Financial Crisis of 2008. In Q2 this year, Saudi’s PIF invested more than $7.5 billion in the US stock market, taking advantage of depressed prices for leading stocks such as Amazon, PayPal and BlackRock.

Various reports have also noted the increasing popularity of the GCC as a destination for high and ultra-high net worth individuals.

This is particularly true of the UAE, where 4,000 millionaires (on a net basis) are expected to move this year. Bahrain is also forecast to grow in popularity due to its pragmatic approach to regulating foreign ownership of real estate and industrial assets.

Meanwhile, as investors in the Middle East and North Africa are seeking to diversify their portfolio globally, many international wealth management firms are boosting their presence in the region.

A changing environment creates risk and opportunity. The main risk arises from continuing a strategy based on assumptions that no longer apply. Opportunity arises from doing the opposite.

The investments by SWFs show how investors can capitalize on opportunities in a downturn. Undervalued stocks are always a good investment and easier to identify during periods of investor retreat.

Longer-term, investing in growth sectors is key to portfolio growth.

Healthcare, clean energy and technology overall are solid longer-term bets, as their continued relevance means that governments are likely to keep funding them despite—and even because of—future crises.

The last half-year has been difficult for investors of all sizes. Many retirement plans were built on assumptions that have become too optimistic. Unless adjusted, some may need to continue working longer than planned, or adjust their lifestyle during retirement.

But there is always opportunity also. With the right professional, you can review your portfolio allocation and rebalance it towards higher-growth opportunities.

TFO has a history of helping investors navigate the constantly changing market landscape, based on deep professional expertise and a thorough understanding of individual goals. Learn how we can help you grow and preserve your wealth. Follow the link below to schedule a call with one of our financial advisors.

https://www.consultancy-me.com/news/3529/number-of-ultra-rich-in-middle-east-to-boom-in-coming-years

https://www.henleyglobal.com/publications/henley-global-citizens-report/2022-q2/regional-insights/investment-migration-insights-middle-east

https://www.arabianbusiness.com/money/wealth/wealth-managers-expect-asset-management-industry-to-hit-2-trillion-faster-than-expected

The economic headlines are full of doom and gloom in many countries. The Russia-Ukraine conflict continues to put pressure on the global supply of oil while the higher cost of living is threatening the post-pandemic economic recovery.



Seeking Growth In A Downturn

The chart below shows the “triple waterfall” of the S&P500 this year, which belies the psychological journey of investors as they absorbed world events and their implications on global finance and trade. Whether this roller coaster ride is almost done or still underway is uncertain.

The S&P 500 reached a low on June 16, and at the time of writing surged 14.5%. Where it goes from here depends on:

The Atlanta Fed recently raised its Q3 2022 GDP forecast to 2.5%, possibly due to stronger-than-expected domestic purchasing figures in Q1 and Q2.

Other forward-looking indicators are less promising. News of corporate layoffs, less optimism among small businesses and flagging demand for mortgages indicate a weakness in the wider economy.

The International Monetary Fund forecast that US GDP growth will more than halve to 2.3% in 2022, and again in 2023 to 1.0%. Global and US economic growth may remain sluggish in 2022 and 2023. This would erode corporate profit margins and earnings, and hence stock market valuations.

The prospect of double-digit inflation has raised widespread concern this year in western economies that got accustomed to low, stable and manageable inflation over the past two decades.

As global supply shortages normalize, some price pressure may be lifted, particularly for gasoline, industrial metals, lumber and grain.

But core inflation (i.e. excluding food and fuel) may take longer to address. The mere expectation of inflation can cause “unanchored inflation,” regardless of fundamentals. If everyone expects prices to rise, businesses will raise prices and workers will demand raises. All else equal, if inflation expectations rise by 1%, actual inflation will also rise 1%.

The Fed took decisive actions this year, raising rates four times so far. But fear of a recession might lead them to halt, or even reverse, their tightening policy.

Long and intermediate bond yields seem to price in lower inflation, which supports this view. But this trend in bond prices may not reflect the prospect of continued restrictive monetary policy.

It may be too early for the Fed to relax. Real interest rates are still highly negative, and the reduction of the balance sheet remains far from its target. Therefore, the Fed is unlikely to contemplate another rate cut before December 2023.

The US economy may well face an extended period of low growth, persistent above-average inflation, and more restricted access to capital.

Regardless of market trends, your target portfolio must meet your investment goals. In a challenging market, this cannot happen with a passive approach.

An uncertain environment requires a defensive strategy that focuses on dividends rather than growth. But your wealth will grow only if you invest in assets that are either undervalued or positioned for strong growth.

Our bespoke investment strategies address the goals, circumstances, and risk tolerance of each investor to preserve and grow wealth across market cycles. Call our financial advisors for an initial consultation.

The stock market has been on a roller coaster ride in the first half of 2022. The S&P 500 has dropped 13% from its December 2021 peak by mid-March, rallied 11% by March end, dropped 16% in May, rose 7% in early June, then dropped 12% in the same month.

Investment Convictions For H2 2022

In the simplest terms, a wealth manager is an advisor who helps investors preserve and grow their wealth and achieve their financial goals, from a comfortable retirement, to funding children’s education, or caring for family and generations to come.

A wealth manager starts by assessing your financial situation, objectives, and risk appetite, and then proposes a holistic investment strategy to protect and grow your wealth. Depending on what the investor needs, a wealth manager may advise on investment planning, retirement planning, estate planning, etc.

The next step is to implement your investment strategy and manage your investment portfolio to ensure it remains within your risk parameters and objectives.

Meanwhile, you are free to focus on everything else in your life.

Everyone must work for a living and wealth managers are no different. Can you afford them?

The good news is that good wealth managers 

. Investors rarely pay for their wealth managers from their own pocket. The fees are usually paid from the enhanced risk-adjusted returns, especially in times of recession and volatility.

Unless you’re an investment professional, you should delegate the management of your wealth to a trusted wealth manager and focus on more important things in your life. You may wish to concentrate on self-improvement, focus on your own business that created your wealth, or just enjoy more leisure time knowing that your wealth is in safe hands.

Since 2004, The Family Office has been the wealth manager of choice for more than 200 ultra-high-net worth families and individuals, helping them preserve and growth their wealth through customized solutions in diversified alternatives and more.

 with our financial experts and learn more about our wealth management process.

The short answer is that wealth management services are not at all necessary. They are totally optional services that some investors may choose to obtain. But wise investors would never hesitate to get a wealth manager to work for them.

Do You Need A Wealth Manager?

The terms "bull" and "bear" describe whether stock markets are appreciating or depreciating in value under prevailing market conditions. Investors must understand how the direction of the market affect their investments.

A bear market occurs when the stock market (usually represented by the S&P 500 or the Nasdaq Composite) drops 20% or more from recent highs. It is accompanied by an economic slowdown and poor corporate performance that lead to rising unemployment as companies lay off workers.

In a bear market, pessimistic investors become wary of investing and start to sell, deepening the downward spiral. This may begin with a gradual decline or sudden plunge, followed by weeks, months or even years of stagnant or falling stock prices.

The Great Depression, for example, began with a market collapse in October 1929 and ushered a decade of bear markets.

A bull market occurs when stock prices rise 20% or more from their recent lows. When the market rises, economic conditions are favorable, and employment is high. This is accompanied by a sustained increase in share prices and expectations that strong results would continue for an extended period. Investors become optimistic and confident.

In a bull market, optimistic investors create strong demand for securities while the supply drops as few are willing to sell. Share prices rise as investors compete for available equity. This drives and strengthens the economy.

A bull or bear market is not based solely on the reaction of markets to a particular event. Long-term performance is a key component, notwithstanding short-term corrections that cause small movements.

However, not all long-term market trends can be characterized as bull or bear. A market may sometimes undergo stagnation, where a series of upward movements would be offset by downward movements, resulting in a flat market trend. When a market moves 20% or more, it would be considered either a bull or bear market.

Bull and bear markets are also categorized as “secular” and “cyclical.” A market trend that lasts a long time is called a secular trend. Smaller, short-term trends that go up or down are called cyclical.

In a bull market, investors must take advantage of rising prices by buying equities early and selling them at their peak. Losses would be minor and temporary in a bull market as investors can invest more confidently with a high probability of return.

In a bear market, the probability of loss rises because prices lose value continually. Profits are made mostly in short selling or safer investments, such as fixed-income securities. Defensive stocks, in sectors like utilities where people buy regardless of economic conditions, are impacted minimally by changing market trends, and constitute a safe choice for investors.

To weather changes in economic environments, you must diversify your portfolio across asset classes, such as stocks, bonds, cash, and alternative assets. The composition of your portfolio depends on your risk tolerance, time horizon and goals, and the proper asset allocation strategy allows you to avoid the negative effects in any one asset class or investment.

Investments in long-term alternative assets that feature uncorrelated risk-reward profiles, like private equity, private real estate, private credit, structured finance and selective venture capital and hedge funds, helps to shield your portfolio from volatility.

The Family Office, a leading wealth manager in the Gulf region, uses a global network of partners and decades of experience to build diversified portfolios in private market opportunities. Contact your financial advisor to help you build a robust portfolio that preserves your family wealth for generations to come.

As inflation reached a new 41-year record, interest rates climbed and stock prices dropped, we’re clearly in a bear market after a decade of bullish markets.

Bull And Bear Markets: An Overview

Wealthy families in Saudi Arabia and throughout the region face many challenges

As the founder ages, the pool of wealth is subdivided among a greater number of heirs

2. Pressures on Sustained Living Standards

The price of luxury living extremely well has increased 10x over the last 40 years.

Poorly planned investments can rapidly erode assets in a short period of time.

As the business matures, the company pays dividends to shareholders rather than reinvesting in the growth of the company.

Different types of taxation across jurisdictions can cause a significant drain on assets if not correctly managed.

A lot of family wealth is invested in local assets, including local real estate and stock market, which often leads to over-exposure. True diversification can only be achieved through investment in non-correlated asset classes on a global basis.

The children and grandchildren of wealthy individuals who grew up without financial worries often neglect financial planning and investment as they grow older. But families who create a financial strategy with expert advisors can achieve financial security for generations. Thanks to the magic of compounding returns, forward-thinking families can receive generous incomes while they continue to grow their wealth over the long term.

The most effective wealth heritage planning advisors keep the source of wealth in a centralized portfolio. This way, multiple family members can benefit from a generous income, while the value of the overall wealth is preserved over time.

Heritage Wealth Planning is a common way for affluent families to secure a financial legacy for their children, grandchildren and beyond. At The Family Office, our team of experts consider the income and lifestyle requirements of the whole family and create a tailor-made heritage wealth plan for you.

We’ll find the balance between the risk needed for your goals and preferred standard of living. Using our network and decades of experience, we create tax-efficient, internationally diversified portfolios, so your wealth can last and grow for generations upon generations.

To start building your lasting family wealth, speak to your financial experts today.

This presentation is provided to you by The Family Office Co. BSC(c) (“The Family Office”) for informational purposes only, and contains proprietary information that may not be reproduced, distributed to, or used by, any third parties without The Family Office’s prior written consent.

All information, figures, calculations, graphs and other numerical representations appearing in this presentation have not been audited and may be subject to change over time. Furthermore, certain valuations (including valuations of investments) appearing in this presentation are subject to change as they may be based on either estimates or historical figures that do not reflect the latest valuation. Although all information and opinions expressed in this presentation were obtained from sources believed to be reliable and in good faith, no representation or warranty, express or implied, is made as to their accuracy or completeness. The information contained herein is not a substitute for a thorough due diligence investigation. Past performance is not indicative of and does not guarantee future performance. Exit timelines, prices and related projections are estimates only, and exits could happen sooner or later than expected, or at a higher or lower valuation than expected, and are conditional, among other things, on certain assumptions and future performance relating to the financial and operational health of each business and macroeconomic conditions.

The Family Office makes no representation or warranty, express or implied, with respect to any statistics or historical or current financial data, whether created by The Family Office through its own research or quoted from other sources. With respect to any such statistics or data delivered or made available by or on behalf of The Family Office, it is acknowledged that (a) the investor takes full responsibility for making its own evaluation of the materiality of the information and the integrity of the quoted source and (b) the investor has no claim against The Family Office.

Amounts in currencies other than the US Dollar are translated using prevailing market rates as calculated by The Family Office or its service providers and may differ from the rates used by banks. The rates are indicative only and do not reflect the rates at which The Family Office would be prepared to enter into any transactions with other parties.

Certain information contained in this presentation constitutes “forward looking statements,” which can be identified by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “plans,” “estimates,” “intend,” “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. To the extent this presentation contains any forecasts, projections, goals, plans and other forward looking statements, such forward looking statements are inherently subject to, known and unknown, significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond The Family Office’s control and may cause actual performance, financial results and other projections in the future to differ materially from any projections of future performance, results or achievements expressed or implied by such forward looking statements. Investors should not place undue reliance on these forward looking statements. The Family Office undertakes no obligation to update any forward looking statements to conform to actual results or changes in The Family Office’s expectations, unless required by applicable law.

The Family Office makes no representation or warranty, express or implied, with respect to any financial projection or forecast With respect to any such projection or forecast delivered or made available by or on behalf of The Family office, it is acknowledged that (a) there are uncertainties inherent in attempting to make such projections and forecasts, (b) the investor is familiar with such uncertainties, (c) the investor takes full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts so furnished to it and (d) the investor has no claim against The Family Office.

This presentation represents a summary of certain information, the full terms of which are contained in a Private Placement Memorandum that should be reviewed for a more complete understanding of the investments and their risks. In addition, this presentation does not constitute an offer to sell, or a solicitation to buy, any instrument or other financial product, nor does it amount to a commitment by The Family Office to make such an offer at present or an indication of The Family Office’s willingness to make such an offer in the future.

The Family Office is a Category 1 Investment Firm regulated by the Central Bank of Bahrain C.R.No.53871 dated 21/6/2004. Paid Up Capital: US$10,000,000. The Family Office only offers products and services to ‘accredited investors’ as defined by the Central Bank of Bahrain.

Without a financial strategy, many affluent families can miss on long-lasting wealth. Without effective planning, family wealth disintegrates over time as it spreads over a growing number of family members. An estimated 70% of affluent families lose their wealth by the second generation and 90% lose their wealth by the third.

Why Heritage Wealth Planning Is More Important Than Ever?

Since then, the Consumer Price Index (CPI) showed a year-on-year (YoY) increase of 9.1%, the highest since 1981.

Markets are beginning to price in a 1% rate increase at the next Fed meeting,

 an unprecedented move that could push the US into a recession.

The Biden Administration is urging calm and assuring the US public that the situation can be contained

As the most commonly used measure of price growth, the CPI measures the price movement in a basket of goods and services (e.g. food, travel, rent) that represent the typical household spending of an urban consumer. 

 excludes food and energy, which tend to be more volatile.

Fuel costs increased 11% in June, and nearly 60% YoY, largely due to global problems unconnected to the US economy. Costs have also surged in other categories such as rent and dental care.

Contributing to the price increases are supply chain issues, post-pandemic surges in demand for goods and services, and the Covid stimulus spending.

Unchecked inflation induces workers to demand higher wages, leading employers to continue to hike prices regardless of the fundamentals of supply and demand. Meanwhile, as inflation erodes their purchasing power, consumers become less confident and spend less, leading to reduced economic activity.

Significant spikes in US inflation have happened before in the post-war era, the early 1970s, and early 1980s. The last time that rapid inflation was tamed by monetary policy was during the so-called “Volcker era.”

Paul Volcker took control of the Fed in 1979, when headline inflation was running at 9%.

He pursued a ruthless strategy of tightening the money supply continually and raising interest rates (which peaked at 19.5% in 1980). The strategy worked. Inflation was controlled by the end of the decade, and a new bull market lasted 18 years.

The US economy had a bumpy ride in between. Inflation continued to climb despite Volcker’s actions, peaking at 14.8% in 1981. Two brief but severe recessions ensued.

Jerome Powell hopes that price stability can be restored without a Volcker-like campaign, and its economic consequences.

A recent publication by Larry Summers, former US Secretary of the Treasury, and a group of economists suggested that we may be closer to the peak inflation of the Volcker era than we think.

The methodology for calculating CPI has changed since the 1980s. Home ownership cost, for example, is no longer considered. Adjusting for this change, the 1981 peak would have been 11.4%, not 14.8%.

Source: National Bureau of Economic Research

 Also as calculated today, even the harsh Volcker policy would have reduced core inflation by just 4.8%, not 10.6%. This implies that the Fed may need to consider far more austere measures to reduce core inflation from 5.9% to a more manageable 1%.

The Larry Summers report shows how historical data can be interpreted to make widely different predictions. Regardless of historical precedents, any drastic moves by the Fed are bound to affect US consumer demand, employment and the stock market.

https://www.cnbc.com/2021/11/30/powell-says-fed-will-discuss-speeding-up-bond-buying-taper-at-december-meeting.html

https://www.bls.gov/news.release/cpi.nr0.htm

https://www.reuters.com/markets/us/fed-seen-jacking-interest-rates-further-us-inflation-soars-2022-07-13/

https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/13/president-biden-statement-on-cpi-inflation-in-june/

https://www.forbes.com/sites/johndobosz/2022/04/25/powells-plan-to-exorcise-inflation--echoes-early-1980s-volcker-crusade/?sh=1ef8f5e420a2

https://www.nber.org/system/files/working_papers/w30116/w30116.pdf

When US inflation began to spike in March 2021, Federal Reserve (“Fed”) Chairman Jerome Powell described the trend as transitory. Eight months later, it showed no sign of slowing.

How Bad Is US Inflation?

"And bonds are not the place to be these days… Fixed income investors worldwide… face a bleak future"

– Warren Buffett, 2021 Berkshire Hathaway Inc Annual Letter.

Austria is the 14th richest country globally in terms of GDP per capita. Its bonds should be a safe investment, but are they?

The above chart shows that if you had invested in the Austrian 100-year bond issued a year ago, you would have lost 40% if you sold the bond today.

This extreme example illustrates the changing risks of fixed income investments in a rising interest rates environment.

Bond prices are inversely related to interest rates. Bond prices fall when interest rates rise, and the yields of alternative investments become more attractive.

The following chart shows that longer term bonds suffer a sharper drop in value when interest rates rise.

A change in interest rates affects the present value of the future interest payments of a bond exponentially, not linearly. This concept is also known as convexity, which measures the sensitivity of a bond to interest rate changes.

Bonds in the bull market of the last 40 years

Over the past 40 years, US interest rates have fallen from a peak of 14.5% in 1981 to just 0.25%.

If you had invested in US 10-year treasury bonds over this period, your annual risk-free return would be 7.8%

The multi-decade trend has been aided by the deflationary forces of globalization, technology development and slowing population growth.

Bonds have played an important role in a balanced portfolio historically, providing healthy yields and protection during a recession.

Heading into a rising interest rate environment

Interest rates that are near zero have no room to drop further. In 2020, the US Federal Reserve (the “Fed”) indicated that interest rates would remain low as inflation was expected to be transitory. Now, the Fed plans interest rate hikes in 2022 to control inflation.

Besides reducing the value of bonds, rising interest rates increase credit risk as economic activity slows and liquidity tightens.

In his annual letter, Warren Buffett indicated that that fixed-income investments no longer offer yields commensurate with credit risks. Long-term bonds are especially at risk of suffering a significant drawdown when rates rise. The pain for fixed-income investors may have already started.

The following chart shows the historical performance of various asset classes

Source: Indices used: Hamilton Lane All Private markets with volatility de-smoothed; Hamilton Lane All Private Equity ex. Credit and Real Assets with volatility de-smoothed; S&P 500 Index; Russell 3000 Index; MSCI World Index; HFRI Composite Index; Hamilton Lane Private Credit with volatility de-smoothed; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Hamilton Lane Private Real Estate with volatility de-smoothed; Hamilton Lane Private Infrastructure with volatility de-smoothed; FTSE/NAREIT Equity REIT Index; S&P Global Infrastructure Index; MSCI World Energy Sector Index. Geometric means returns in USD. Assumes risk free rate of 2.2% representing the average yield of the ten-year treasury over the last ten years.

Clearly, the absolute and risk-adjusted returns (based on the Sharpe Ratios) of private markets are higher than their public market equivalents. Bonds in a rising interest rate environment are likely to return less than 6% annually with greater volatility.

The closest alternative is private credit. Historically, private credit has provided higher returns and has been more resilient to rising interest rates because it often involves floating rate loans that increase yields as the benchmark interest rates rise.

Meanwhile, private equity is another attractive alternative for investors with a greater risk appetite. The asset class has generated the highest absolute return and highest risk-adjust return over the past 15 years.

Since 2004, we have helped clients build bespoke investment portfolios that capture the opportunities with the best relative value in the environment. We manage US$2 billion worth of assets for over 200 clients. Contact us today to protect and grow your wealth a rising interest rate environment.

https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

https://www.hamiltonlane.com/en-US/Basic/78a7dc11-5eae-41e7-9900-2c537d04dbe3/What-Have-the-Markets-Done-Risk-Adjusted-Returns

Bond prices fall when interest rates rise, and the yields of alternative investments become more attractive. Find out more on how you take advantage of this!

Time To Consider Bond Alternatives In A Rising Interest Rate Environment

For our purposes, long-term investments are illiquid, income-generating assets that are intended to be held for three years or longer. They come in a variety of asset classes including private equity, private debt, real estate, and many others. Although their book value may be subject to mark-to-market adjustments from time to time, their real value tends to be immune from temporary market fluctuations, leading to meaningful wealth creation in the long term.

Investments should not be done on a whim. Investments based on long-term convictions offer many rewards.

Market drops are stressful events that often trigger an instinctive reaction to sell the investments. But holding your investments during difficult times can reap considerable reward when markets bounce back.

Consider Black Monday, when the Dow Jones Industrial Average lost more than 22% of its value on 19 October 1987. Most investors panicked and sold their investments, and realized the losses immediately. Those who didn’t panic, and stayed invested in large-cap stocks, got returns of 16.6% in 1988 and 31.7% in 1989.

Compounding returns are like a snowball rolling down a hill, steadily growing as it gathers more snow. Year on year, reinvesting the returns on your investment grows your wealth. The longer your investment strategy, the more you benefit from compounding returns.

Long-term investing does not require extraordinary trading skills or financial savvy. You just need patience and a strategy to make the most of your returns.

Listen to your head, not your heart. Instead of aborting investments at the slightest market sneeze, assess the situation to prevent irrational decisions.

The Family Office adopts the Endowment Model as a long-term strategy to grow and preserve the wealth of more than 200 clients base across the Gulf Cooperation Council. Schedule a call with our financial advisors and start building your investment strategy.

Due to their illiquid nature, alternative investments require a long-term commitment to reap the benefits of the illiquidity premium. Alternative investments cover a broad range of assets classes (excluding liquid ones like stocks, bonds and cash). They include precious metals, collectibles (art, wine, antiques, coins, or stamps) and financial assets such as real estate, commodities, private equity, distressed securities, hedge funds, exchange funds, carbon credits, venture capital, film production, financial derivatives, and cryptocurrencies. The Family Office focuses on tangible alternative asset classes that can preserve and grow your wealth.

Private equity includes companies or business ventures that do not trade on stock exchanges, like the Nasdaq or New York Stock Exchange. Unlike publicly traded stocks, private equity investments are not regulated and are best suited to knowledgeable, experienced investors. Returns are usually made when the private equity investment is exited through a sale or IPO. Adding private equity to your portfolio can offer above-average returns.

The real estate market is vast and varied. It encompasses four broad categories: residential real estate, commercial real estate, industrial real estate and land. Each broad category is further subdivided into subcategories. Commercial real estate, for example, covers any property used for business purposes, such as offices, retail shopping centers, hospitals, hotels, etc. Fundamentals vary greatly by sector, subsector and location. Long-term investors may capitalize on certain themes. For example, due to the high cost of owning a home, millennials are forsaking home ownership in favor of renting. Investors can capitalize on this trend by investing in apartment complexes in cities with younger emerging professionals.

Private debt, or private credit, is an investment in the debt rather than the equity of privately held companies. Most commonly, it involves non-bank entities making loans to private companies or buying such loans on the secondary market. Debt is generally less risky than equity because debt service has priority over dividends. Debt returns are also generally lower than equity returns. However, when banks have to restrict their lending due to more stringent capital and liquidity requirements, attractive opportunities arise in the private debt space.

The average investor may be wary of investing in emerging markets due to the lack of familiarity with local risks and regulations. Foreign businesses in prosperous economies and growing sectors can be a great opportunity with the right investment manager.

Patient investors who are willing to invest long term in alternative asset classes can reap better rewards, especially with compounding returns. The right wealth manager can help you set an investment strategy that meets your long-term while navigating the risks across market cycles to preserve and grow your wealth.

The Family Office provides world-class, thoroughly-vetted, long-term investment opportunities in alternatives. We favor the Endowment Model of investing to build diversified portfolios that balance risk to generate the desired returns. Schedule a call with one of our financial advisers to learn about the investment solution that suits your exact needs.

https://www.wealthify.com/blog/what-are-the-benefits-of-long-term-investing

Good things come to those who wait. This old proverb which originated from a poem by Lady Mary Montgomerie Currie (1843-1905) means that people who are patient are typically rewarded by achieving their goals. Although the poet’s advice was not intended for investors, investing over the long term based on fundamentals reaps far more lasting rewards than speculative short-term trading.

Articles

EducationWealth & Risk Management

Protecting Wealth From Inflation

GeneralMarket Insights

Seeking Growth In A Downturn

Market InsightsGeneral

Investment Convictions For H2 2022

EducationWealth & Risk Management

Do You Need A Wealth Manager?

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