Multi-Family Office Sand Aire Bullish Despite Economic Chill

Tom Burroughes

18 April 2008

Family values can be a vague political cliché but the benefits of of running families’ wealth in a bespoke financial operation is a matter of unsentimental fact. So argues Sand Aire, a UK-based multi-family office set up 12 years ago to manage money for the UK-based Scott family, now managing the financial affairs and investments of 15 families. Sand Aire, which oversees a total of $2 billion of clients’ assets, sits in that relatively rarefied sector in the UK that is occupied by multi-family peers such as Stanhope Capital, Lord North Street and Fleming Family & Partners. “I think the family office business model will still grow, even with what has happened each year,” Ms Major said. Sand Aire will accept clients with investable wealth of at least £20 million but it is normal for that figure to be around £50 million for a family to use the whole range of available services, spanning investment management, administration and consultancy services. Right from the start, Sand Aire was set up to be a multi-family office, rather than single office, business. The Scott family, led by Sir James Scott, created and owned Provincial Insurance, a UK business that was set up in 1903 and later absorbed into the French insurance giant, AXA, in 1994. As the wealth of that sale was realised, the Scott dynasty’s successors looked to manage their wealth through a family office structure. Since then, Sand Aire has continued to develop. Early in 2006, Sand Aire was merged with Northbridge, another multi-client family office in the UK. Sand Aire is jointly owned by its founding family and employees and the founding shareholders of Northbridge. Ms Major is confident that Sand Aire will continue to grow. The multi-family office cannot be immune, however, to the weakening market conditions. With any luck, the cooling effect of the global credit crisis may merely be a punctuation point in what has been a bonanza in the growth of ultra high net worth individuals’ assets. UHNW individuals (with financial assets $30 million plus), grew 11.3 per cent to nearly 95,000 around the world in 2006, according to the latest Merrill Lynch/Capgemini survey issued last year. The total wealth of this elite group grew by an impressive 16.8 per cent to $13.1 trillion, showing that wealth is becoming more concentrated amongst the ultra rich. This trend is echoed by what Barclays Wealth last year termed “super high net worth” individuals with aggregate wealth (including property) of $3 million or more. Between 2006 and 2016, in each of the G7 countries, its report forecasts that the numbers of super HNWs will rise at a faster rate than their HNW or affluent counterparts, led by Japan (298 per cent), the UK (276 per cent) and Canada (255 per cent). In fact, the latest market turbulence could be the dark cloud to a silver lining for Sand Aire because falls in global stock markets only reinforce the desire of people who have earned large fortunes, or inherited them, to preserve their assets through institutions with a powerful family-oriented interest in doing so. The MSCI World Index of equities, for example, has fallen by 8.3 per cent since the start of the year. That creates a powerful pressure on families to seek safety as a bare minimum requirement. A shift into the supposed “safe haven” of cash or cash proxies like money market funds is not risk-free, however, said Ms Major: “One area that is in a number of client’s minds at the moment is the issue of how safe is cash? We haven’t seen any banking defaults but it is a concern in the current market environment.” Ms Major referred to examples of how some enhanced cash funds had taken losses because of exposure to problems in the credit markets and had required propping up by their managers. To illustrate the risks, Wells Fargo, the US bank, has recorded a loss tied to some complex debt that lost value and which is held by its money market mutual funds in the US. Last August, Axa Investment Management shored up money market funds that took losses linked to the credit crunch. In that environment, even absolute return products like hedge funds, which pride themselves on their supposed ability to make money in all market conditions, have had a rough ride, said Ms Major. “However, good, well managed funds will continue to do well but what the recent market has shown is that a number of hedge funds, although claiming to be absolute return, were not,” she added.