The Whitlock family wealth came from the sale of legacy real estate holdings. In the seven years following the initial liquidity event, the wealth was managed by two investment banks. The family\u2019s portfolio was made up of multiple trusts of different sizes, invested mostly in US stocks, ETFs, Treasuries, and municipal bonds. The investments in the children\u2019s trusts mostly paralleled those in the parents\u2019 portfolios\u2014all invested with the goal of wealth preservation. No member of the family was a professional investor; they had little experience in making investment decisions at scale.<\/p>\n
CLIENT BRIEF<\/strong><\/p>\n The mother, Jane, was the family\u2019s financial decision-maker, but her children\u2014having reached their 40s and in the midst of building families of their own\u2014wanted to become more involved in managing the family\u2019s wealth. After investing in a local startup, one of the daughters became intrigued by the opportunity to capitalize on new and emerging innovation to boost the return potential of investments. She wondered if there was a place for this type of investing for the family more broadly, and if the family\u2019s current providers were capable of, or experienced in, private investing for families. A period of market volatility spurred the second generation\u2019s concern further, causing them to wonder if the family\u2019s assets were receiving the sophisticated thinking and hands-on management they needed.<\/p>\n CLIENT NEEDS<\/strong><\/p>\n The Whitlock family asked Patrick, their estate planning attorney and trusted friend, to help them find a firm that could provide:<\/p>\n Through his own professional advisor network, Patrick was familiar with Cambridge Associates (CA) and our expertise working with family investors. He introduced the Whitlocks to Daniel, an Investment Director at CA.<\/p>\n OUR SOLUTION <\/strong><\/p>\n After a series of exploratory meetings, Daniel took on the role of lead Investment Director for the Whitlocks\u2019 dedicated CA team. With other members of this team, Daniel conducted a full Family Enterprise Review, which entailed an extensive assessment of the Whitlocks\u2019 family wealth ecosystem, including their assets; investment structures and vehicles; goals and interests; spending and cashflow requirements; time horizons and risk tolerance; family wealth decision-making and governance structure; and operational needs. (See <\/em>Portfolio Construction: A Blueprint for Private Families<\/em><\/a> for additional insight into how we build portfolios and our family enterprise review process.<\/em>)<\/span><\/p>\n During the enterprise review and conversations with the family, Daniel understood that Jane\u2019s preference for a larger allocation to safer, more conservative, investment choices was rooted in her desire to preserve the family\u2019s wealth for future generations. However, in running several scenarios and spending analyses with the family\u2019s assets, Daniel was able to demonstrate that, for the Whitlocks\u2019 expanding family (including grandchildren) to enjoy such opportunities, the family\u2019s wealth would need to grow significantly more than could reasonably be expected of their existing portfolio approach. While this conservative approach had been seen as the surest way to protect and preserve wealth, the CA team\u2019s thorough explanation and in-depth scenario testing helped reveal that such an approach would likely instead erode wealth over time, especially as the wealth was disbursed across multiple family members.<\/p>\n Through their discussions with Daniel and his team, the Whitlocks learned about opportunities to compound their wealth at a higher rate without significantly increasing their risk profile, while still maintaining enough liquidity and a balance of risk-mitigating assets to weather an extended market downturn. CA recommended a portfolio structure of 75% equities, including new allocations to private assets, and 25% in protection and safety-oriented assets.<\/p>\n\n
\n