Summer 2011
In assessing risk, consider financial and operating assets
A total wealth management approach measures risks and rewards separately for the two types of assets -- and considers emotions.
By Francois de Visscher
Most family businesses and single family offices around the world are still dealing with the aftermath of the financial crisis. Many are confronting an interesting problem: a significant shift in allocation of the family’s total wealth between operating assets (the business or other mostly illiquid investments) and financial assets (the family’s liquid investment portfolio).
Most likely, both the operating assets and the financial assets suffered a major devaluation during the crisis. However, the speed and magnitude of the devaluation were not equal for the two asset categories. A portfolio that was balanced before 2008 may now look very imbalanced, with an …
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