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Sunday 13 February 2011

"Own-Self Do It"

When my wife was a little girl, her parents and siblings would often offer to help her to do things.  Her response was usually, "own-self do it!" This sense of independence, self-competence and self-confidence has served her well in her life.

As we look at single family offices and family controlled businesses and how they have faired in the financial crisis, the rather limited and selected group that I interact with have generally done better than the private banks, wealth managers and funds of funds.  Why?  I believe it is down to an "own-self do it" attitude on the part of these families.

Having built significant businesses in a range of industries such as agriculture, oil & gas, media, mining, real estate, retail, shipping, software, technology and transportation, it should not be surprising that these families have the confidence to make investment selection and allocation decisions that are in tune with their specific needs and outlooks.

They have seen and heard enough inflated promises from financial service providers over the years, that a healthy scepticism is alive and well among family offices.  This has helped them to preserve their own capital, when the private and investment banks, and funds of funds have been found lacking in performance and exposed to frauds such as Madoff, Bayou and Stanford.

In fact, from my informal observations, the higher the proportion of in-house investment decision making by a family office, the better and the more consistent their returns.

This healthy scepticism has also helped family offices to avoid the financial engineering gadgets and leverage that benefitted the investment banks at the expense of their client's capital.

Hats off to the single family offices that have stayed with the control and transparency they need, so that "own-self do it" has been a winning strategy.


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