Family offices: interest rates spike

As Risk and Return in Latin America is published, John Moore, chairman of Morgan Stanley's Latin American business, highlights the factors that can influence how families manage their wealth

CampdenFB (FB):What can Latin American families gain from opening a family office?

John Moore (JM):Family offices can be valuable institutions for families in Latin America for a number of reasons. First, they provide a structure for organising investments in different asset classes. Second, they allow the family to access investment ideas and transaction opportunities through a centralised clearinghouse. The office provides a single point of contact to co-ordinate the strategic objectives of the family and monitor capital positions and liquidity against risk/return objectives.

FB:What other benefits come from having a family office?

JM:Often, the source of wealth for a family office is derived from a particular industrial sector. If it is the intent to remain active in this sector, whether to grow existing businesses, find new partners, or monetise, the family office provides a mechanism for market surveillance, transaction origination, and execution. Also, with an investment landscape that is increasingly complex and global, professional expertise for investments outside the region is often best housed in a family office.

FB:The report talks about the risks of doing business in Latin America. What are these risks?

JM:Many of the risks are largely the same as in developed markets and include managing through economic cycles and balancing capital preservation and return objectives. Obviously, in Latin America more recently, political and market changes have been rapid, which introduces a whole other set of risk parameters.

FB:What factors affect how families should manage their wealth and whether they should form their own family office or become part of a multi family office?

JM:It depends on scale. For family offices with a smaller pool of assets under management, either a multi family office or single family office with certain functions outsourced may be more appropriate. However, once you begin to grow, the needs of the office grow across asset management, risk and compliance controls, as well as for evaluating transaction opportunities.

FB:The report highlighted the fact that many younger generation family members are educated internationally and may live outside the region. What implications does this have for how family offices are managed?

JM:It's part of the overall tendency towards dual-venue family offices. With part of the family living in the US, for example, and focused on global investments and diversification, having a presence in the US adds real value. Generational change may also imply a focus on new priorities, whether its sustainability, philanthropy, or other wealth management objectives. Again, a family office with a global reach may help manage this transition.

FB:Reports from earlier this year indicated that Morgan Stanley was looking to hire 75 advisers in the US to work with ultra-high net worth Latin American families who were keen to invest in the US. What is the thinking behind the company's increased focus on these Latin American investors?

JM:Morgan Stanley is definitely investing in offshore wealth management for Latin American families. We've had some advisers join us from other firms. There was a large transfer of financial advisers, clients, and assets from Credit Suisse recently, and we intend to do more. It plays into all the threads we've been discussing: the opportunity to diversify investments, access products and services on a global scale, and provide an overall client experience that takes advantage of the full resources of our firm.