Wednesday, February 18, 2015

Wealth Management & 2014 performance

Several of my friends (all ex-bankers) have been recruited to run family offices -- or at least the investment arm of family offices.  Overall the experience has been good, aside from the last minute: "fly down to Miami to brief me on what's going on" the work is interesting and moving from the sell side to the buy side can also be great.

The overall view of 2014 was that it was a spectacular year.  All three (ok not that many) hinted that performance had been spectacular:  " its a lot easier to make money went you start with a lot".  The figures were simply mind blowing:  21%, 27% and 31%.  So what the encore for 2015?

They are all taking their cash off the table.

Bottom line, although they don't think the market is going to crash, but the odds of a market crash are higher now than they've been in some time; Oil price collapse -- still around $50/bbl is a problem for the debt capital market and housing market (here in Canada), but overall in the US too with about 1/3 of junk bonds being issued by mineral ressources or energy extraction companies -- who are not having a good time. They've all noted a real slow down in China, things in Europe are OK but not great and Greece could prove to be a real problem (it could also fade away-- as some form of agreement is reached with the EU).

But, bottom line they've got an amazing 2014 and there's no pressure to generate big numbers in 2015.  All three have taken the view that after an excellent year, they can afford to hold and wait.  Take it easy (not easy for my friends that are ALL deal junkies!)  Still, I have no idea if this trend is pervasive or its just a coincidence, but it remains amazing that three out of three are taking the cash and going home.

Food for thought

Post Script:  It was pointed out to me over the weekend that as a Canadian wealth manager, a good percentage of these investors' cash would have been invested in USD denominated assets -- and since the CAD as dropped by nearly 15% over the past 12 months, a 21% performance is not that great...


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