Single-family offices have taken tactical steps to tighten their approach towards cash management, liquidity and risk management since the 2008 crisis, a recent survey by Cambridge Associates reveals.

Single-family offices have taken tactical steps to tighten their approach towards cash management, liquidity and risk management since the 2008 crisis, a recent survey by Cambridge Associates reveals.

The survey, which covered 40 single-family offices in the US and Europe with median assets of $534 million, found that 62 per cent had increased liquidity and cash reserves, with cash positions rising from 7.5 per cent pre-2008 to 9.6 per cent. Meanwhile, 49 per cent rebalanced portfolios, 43 per cent actively reduced portfolio risk, and 41 per cent conducted more projections of cash flow and capital calls.

This repositioning has left family offices in a position to capitalize on future opportunities, such as European distressed debt, said Douglas Macauley, managing director at the firm.

However, these changes were among “few” that family offices made in response to the 2008 meltdown and subsequent volatility, said Cambridge Associates, as these organizations were already well positioned leading up the crisis.

"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 Macauley. "In addition, as we have studied compensation of family office professionals, we have observed more alignment between portfolio performance and compensation."

Following the crisis, 27 per cent have amended their strategic asset allocation approach, according to the survey, with several increasing allocations to hedge funds, distressed debt and real estate, while decreasing exposure to public equities.

Management and oversight policies

In terms of management and oversight policies, the most significant response to the events of recent years has been a heightened focus on monitoring external investment managers. Of the family offices surveyed, 71 per cent amended performance monitoring and review of outside managers, and 48 per cent updated their due diligence process on hiring managers.

Of the offices providing information on the use of external consultants or advisory services, 83 per cent reported this had either stayed the same or increased since 2008, according to Cambridge Associates.

"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."