Ultra-High Net Worth Families Focus on Liquidity, Have Tig

Ultra-High Net Worth Families Now Focus on Liquidity and Have Tightened Risk Management Practices, According to Cambridge Associates Survey

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(http://www.CambridgeAssociates.com)

Family offices that oversee assets for ultra-high net worth families

made few strategic changes in response to the 2008 meltdown and

subsequent volatility. They mainly effected tactical adjustments, such

as increasing liquidity and cash reserves. Family offices also placed

more emphasis on capital call projections.

That's according to a survey of 40 single family offices in the U.S.

and Europe conducted in 2011 by Cambridge Associates, the global

provider of independent investment advice and research to

institutional and private investors. The multi-year survey focuses on

family office compensation, governance and risk management practices.

The median asset size of the family offices in the survey was $534

million, and participants represented a mix of Cambridge Associates

clients and other family offices that work independently or with other

advisors.

"It's evident from the research that family offices were already well

configured, and although in many cases they tactically made

adjustments, strategically most were prepared going into the financial

crisis," said Douglas Macauley, Managing Director at Cambridge

Associates. "In addition, as we have studied compensation of family

office professionals, we have observed more alignment between

portfolio performance and compensation."

Some Tactical Changes –and a Few Strategic Adjustments

While largely well-positioned, family offices took the following more

tactical steps to tighten up their approach to liquidity, cash

management and risk management in response to the financial crisis and

ongoing post-2008 volatility:

"We believe that family offices' increased focus on liquidity and cash

reserves now will position them well to take advantage of future

market opportunities, such as European distressed debt," said

Macauley.

Only slightly more than a quarter (27%) of family offices chose to

amend their strategic asset allocation approach. Several increased

allocations to hedge funds, distressed and real estate. Meanwhile,

decreases were seen in public equities.

Impact of Financial Crisis on Management and Oversight Policies at

Family Offices Mainly Confined to Performance Monitoring of External

Managers

The most significant alteration to family office oversight involved

the monitoring of outside investment managers. Most (71%) amended

performance monitoring and review of such managers, and nearly half

(48%) updated the due diligence applied to the manager hiring process.

However, only a third said they added more risk metrics to performance

reporting or to their policy statements.

Of the offices that provided information about their use of external

consultants or other advisory services, 83% reported they either

increased or remained constant since 2008 in their reliance on those

providers.

"When it comes down to it, the most common response to questions about

changes to family office oversight and management policies in the

post-2008 period was that none was made. Presumably family offices in

general were already comfortable with their oversight and management

practices," said Macauley. "Equally interesting were observations that

the underlying family had a long-term horizon, had the resources to

ride out difficult market environments and, for the most part, did not

initiate changes in their investment policies in reaction to the

crisis."

About Cambridge Associates

Founded in 1973, Cambridge Associates is a provider of independent

investment advice and research to institutional investors and private

clients worldwide. Today the firm serves over 900 global investors

representing more than $3 trillion in aggregate assets. Cambridge

Associates delivers a range of services, including investment

consulting, outsourced portfolio solutions, research services and

tools (Research Navigatorsm and Benchmark Calculator), and performance

monitoring, across all asset classes. Cambridge Associates has more

than 1,000 employees based in seven global offices in Arlington, VA;

Boston; Dallas; Menlo Park, CA; London; Singapore; Sydney; and

Beijing. Cambridge Associates is recognized as a thought leader,

innovator and advocate for investors. For more information about

Cambridge Associates, please visit

www.cambridgeassociates.com(http://ctt.marketwire.com/?release842155&id1173691&type1&urlhttp%3a%2f%2fwww.cambridgeassociates.com%2f).

For more information, or to arrange a conversation with Cambridge

Associates, please contact Frank Lentini at Sommerfield

Communications, Inc., at 212-255-8386 or

lentini@sommerfield.com(lentini@sommerfield.com).

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