Russia’s recent invasion of Ukraine has certainly changed the viewpoint of investors for the short and medium-term. Added to the Covid lockdowns, supply chain issues and other geopolitical factors, the outlook of higher interest rates and the end of unlimited money growth, the attention of investors is now shifting towards a different direction. Higher inflation and the suspicion that this will persist in the near future, are adding to concerns that wealth protection will become a riskier and more volatile activity.
Central banks around the world are recognising that their strategy must change. For some, this appears to mean a more urgent and drastic action, while for others a slower process with less impact on consumers. But more importantly in this fast-changing world, they are all unable to provide certainty. And one thing all investors hate is uncertainty. Portfolio managers are scrambling to rebalance their positions, but all avenues seem to lead to uncharted waters and risk correlation.
But whatever the case might be, family offices and long-term market players must not lose track of the basics. The ones who will do best out of these conditions are those who can be flexible and bend with the wind, without breaking. To do this family office management needs to bear in mind three requirements:
- The implementation of good reporting software to enable users to evaluate their risk position and their exposure to leverage
- The establishment of good forecasting methodologies and software to assess future financial positions
- The flexibility to diversify the assets under management into new classes and be capable of managing the family office operation flexibly
Investing in financial software during times of economic uncertainty and downward market conditions may sound counterintuitive. Still, the truth is that it is during these testing times that investors will need to demonstrate their astuteness. Excel spreadsheets will not be enough to empower the family office systems under these circumstances, so brace yourselves by putting in place reliable family office software to give you confidence in your strategy.
Family Offices should ensure that they expand their reporting and analytics capabilities so that they can derive the maximum benefit from design innovation and enable users to customise these through a more imaginative approach.
Financial management software must be capable of growing alongside ancillary activities undertaken by the family office, e.g., venture capital, direct private equity or other commercial operations. Traditional portfolio investment in securities is no longer the basis of survival of medium to larger family offices and current events will necessitate an even wider search for return on capital on the global horizon.