Wealth sphere.

The Family Office principle revolves around the need to coordinate and manage consistent private wealth within one single organisation unit.

Starting situation

Expected outcome

Defining the client’s objectives and risk profile, selecting the most suitable investment strategy and efficiently implementing it, are part of an extensive process involving manifold professional profiles and dedicated competencies.

Having a clear global vision of this complex process without losing sight of its individual components is essential in order to achieve the envisaged goals over time.

As the client’s competence centre, within the wealth sphere, our first task is to coordinate and monitor the entire investment process, trimming the associated costs in line with the client’s wishes, while at the same time giving him access to expert advice conducive to high quality results.

1) Defining objectives and risk profile

At the core of every investment strategy, and therefore of the entire investment process, is the need to understand and define the client’s objectives and his risk profile based on his personal risk/reward expectations.

2) Selecting the investment strategy of the global portfolio

Selecting the most appropriate investment strategy for each client is the result of properly setting individual goals and risk profiles. This choice affects long-term performance more than anything else. The investment strategy must therefore be selected very carefully and reviewed at least yearly, resulting in a clearly defined risk/reward target. Once the risk limit has been determined, we propose to allocate the assets to several investment classes (e.g. equities, bonds, money market) in order to maximise the expected return while respecting the established risk framework. Our allocation process is based on the principle of a broad portfolio diversification, balancing out the client’s preferences and restrictions. This process results in a clearly defined risk/reward target.

3) Tactical decisions in asset allocation

The investment strategy outlines the direction to be followed by portfolio management, whereas the resulting tactical decisions are the paths that need to be taken to reach the envisaged targets. Tactical decisions are based on the current performance of several market indices and their degree of risk, but they also consider their prospects in the foreseeable future. On this basis, the allocation process may be modified among different investment categories (e.g. raising the allocation to “bonds” while reducing the “stock” quota). In asset allocation, tactical decisions rest on independent research covering major economic and financial variables. The analyses are conducted by the Investment Team of MVC & Partners, as well as by drawing on the findings of outside specialists.

4) Selecting best-in-class experts for each investment category

Once the most appropriate asset allocation has been established, the next step is to select the investment strategy that offers the best income prospects. MVC & Partners selects some of the best performing managers for each investment category and regularly monitors their track record. Thereafter, we submit to our clients a short-list of specialists who work for our asset management mandates. High management fees are only justified if the above circumstances apply. Otherwise, we recommend using ETFs or other financial instruments that replicate the performance of market indices at low cost. This often occurs in more efficient markets, where asset managers will hardly ever rely on better information or systematically have a clearer vision than the market.

5) Monitoring results and preparing customised, consolidated reports

Constantly monitoring asset allocation, its risks and the results obtained, is essential in order to maintain control on the investment process. Many of our clients correctly distribute their wealth across several banks. This approach reduces the insolvency risk exposure to single financial institutions and exploits to one’s benefit the knowhow acquired by each bank. At the same time, however, this approach increases the complexity of monitoring consolidated assets. To solve this problem, MVC & Partners has adopted the “INSA” software. This allows us to draw customised and consolidated reports, whereby all transactions executed on behalf of our clients are entered into INSA’s database, enabling us to keep track of the performance of individual bank portfolios alongside consolidated assets. Besides, the application also allows us to produce accurate, in-depth reporting material based on a fair and independent assessment of the market pricing provided by each custodian bank.

6) Monitoring and managing risks

The major trademark of our investment method is a rigorous approach to monitoring and managing investment risks. We are in fact aware that our most demanding private clients are not inclined to tolerate losses exceeding the level agreed to with the portfolio manager, as a consequence of strong market fluctuations. Thus, we always abide by the key objective of our investment process, namely to avoid severe losses in difficult market environments, focusing instead on obtaining better results in the medium and long term. Our efforts to this end are not confined to the activity of assessing and monitoring risks. MVC & Partners in fact uses efficiently all available state-of-the-art financial instruments in order to mitigate the risks deriving from strong fluctuations in stock, bond and currency markets. We also implement a strong diversification of bond investments in order to keep the insolvency risk of a single borrower within a very small percentage of portfolio value. Our investment method also encompasses an advanced portfolio management system that enables simulations and assesses the impact of given transactions prior to their execution.