Case Study

Providing comfort and control

Background

 

UK based family who sold their family business 8/9 years earlier for c£60m. At the time they invested the majority and divided up the sum between 3 investment managers, who they had either some experience of, or who were recommended by third parties. They maintained relationships with all three who had put in place some structures to optimise taxation.

 

Their Investment concerns were as follows:

  • Were the investment managers performing as they should given the level of risk employed? It was felt that reporting was not streamlined and at times was opaque.
  • Were they following objective guidelines issued to them originally or had there been drift?
  • Was there overlap/duplication in style between the three or were they individually adding some value/diversification?
  • Did their pricing remain competitive?

 

IPS held interviews with managers and carried out a deep review of all portfolios to understand the answers to the key questions posed. The conclusions were:

  • One manager had not correctly interpreted the mandate and was employing materially more risk that the family wished to tolerate.
  • Two managers were under-performing their peer group benchmarks, of which one was employing unsuitable illiquid and esoteric assets.
  • There was style and assets duplication across all three portfolios.

The action taken was initially to replace one manager using a beauty parade process. To reduce cost across two of the three and to place one manager on “close monitor”.

In addition there were concerns around how the family’s wealth was Structured:

  • The family had UK discretionary trusts and were concerned about the 10 year charge and whether these structures remained suitable.
  • The children were in their early 20’s, were completing tertiary education or were embarking on their careers. They did not know the extent of the wealth and there was concern how it might affect them and the pursuit of careers.

To address these concerns, we engaged a specialist London law firm to review structures and to advise on alternatives. The result was the establishment of a Jersey-based Family Limited Partnership where we appointed a local fiduciary to manage the structure.

We created with legal input a family constitution which all of the family members signed up to and was the genesis of a process of education for the children, who are now fully engaged with visibility over all of the assets. The constitution required that the children obtain pre-nuptial agreements which we have facilitated to help protected the accumulated family wealth.

The Outcome

 

The Family now feels in control, that the investments are working as they should and there is comfort that there are experienced eyes constantly assessing underlying managers and sitting alongside the family with their best interests solely in mind.

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Simplifying Family Investments

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