Continuing with the Anglicisms introduced by the American world of family offices, we refer to these wealth portfolios, which have been adversely affected by the crisis, as «distressed wealth«, and they need a change of course substantial changes to its management in order to achieve positive results, but just in the right direction. Some portfolios and wealth management strategies in general are based on clear, well-defined strategies that have simply not proved adequate in the current crisis.
But they often come to us after a series of contradictory changes in strategy – nothing more than aimless lurches in which assets inevitably dwindle after each corrective swerve. The usual consequence of these lurches of «I’m leaving, I’m off there»… is the investor’s complete lack of confidence in any kind of strategy, which usually ends up…" cowering beneath a bank vault, which, with any luck, will only serve to minimise the effects of inflation. From the consultations and interviews we’ve carried out with new clients, we can confirm that these are common occurrences these days; however, opportunities are like sunrises – if you wait too long, you’ll miss them.
Therefore, having suffered losses as a result of strategies we were following before the crisis – which have now proved detrimental – our main objectives must be twofold:
- Capital preservation to prevent further losses from occurring (this simple objective can, of course, be achieved simply by holding funds in a bank deposit, for example, but this would not be compatible with objective no. 2).
- The potential to achieve high returns that will compensate us for the losses incurred to date.
These two objectives, which seem so obvious to everyone, cease to be so when we try to put them into practice. At that point, a multitude of variables come into play, such as: the nature of the previous failed investment, the range of assets (not just financial ones), the level of distress or distress the wealth that has accumulated in the portfolio in question, the specific characteristics of the potential client, the current and desired ratios between property and corporate financial assets, and the specific content of their PGR newly established and/or following their latest development, future recovery and growth needs, etc., etc., etc…
However, any strategy we devise for a distressed wealth It must strictly comply with the two main objectives set out above. To give an example – and depending very much on the specific case – a financial investment that guarantees the principal in the medium to long term and which also places the client in a position to benefit from returns and potential capital gains on property within a US$ framework will perfectly fulfil the two criteria listed. Naturally, we will devise many others in collaboration with the client or prospective client. Time will tell which ones work best, but all of them will preserve the principal whilst allowing the wealth owner to benefit from returns and incidental capital gains. Mission accomplished and strategically flawless.
These strategies are specific to distressed wealth, but they can also form part of the strategies to be adopted for portfolios that have been managed correctly and have adapted skilfully and nimbly to the current crisis scenario. In other words, it can also serve as a complementary strategy to those currently proving successful, as investments of this kind will not undermine the structure of any portfolio – quite the contrary.
Failure is a great opportunity to start again, but this time more wisely.