The growing importance of private funds in family wealth planning and structuring
At SGG, we have witnessed over the past few years that increasingly family offices are behaving more like fund managers, and prefer to set up a private fund structure instead of opting for the traditional trust or foundation.
There are a number of reasons to explain this trend, namely the sophistication of the family office, the pooling of assets and funds from different locations, tax optimization, family business continuity and governance, just to name a few.
A fund structure ensures an independent and professional framework in which the family assets can be safeguarded and individual family members’ income can be managed in a tailor-made fashion. Usually the family appoints an Investment Manager for the day-to-day investment decisions, an Administrator to independently calculate net asset values and an auditor to independently verify the financial records and accounting methods, all to ensure access to best industry practices and compliance with local and international regulations.
Moreover, the traditional response in the case of wealth pooling from different jurisdictions and investors has been to split up the group’s wealth into different holding structures. But a simpler way of doing it is by setting up a private fund structure. Through this type of structure, it is possible to consolidate investment reporting across asset types, investment managers and custodians. Private funds can enable wealthy families to keep the group’s wealth together while satisfying the needs of individual group members.
A private fund is a closed-ended structure set up for a specified group of investors. The units or shares of the structure are only accessible to the participating investors or the wealth structures administered for them. It is also important to note that these instruments can provide access to liquidity on personal levels if necessary.
A number of factors need to be taken into consideration before setting up the private fund namely the objective, the distribution strategy and the domicile. An independent administrator can be of true added value in setting up a private Fund structure and helping throughout the process of setting up the fund. Such an Administrator can guide the Investment Manager of the Family Fund in the initial consultation rounds that will pave the way to the best possible structure. This means that the independent Administrator will bring the Investment Manager in contact with legal and tax advisors, who are knowledgeable about which jurisdictions the Administrator and the Investment Manager may operate in and under which conditions.
SGG, the partner of choice to set up your private fund
With a 60 year legacy in providing regulatory, compliance and wealth planning services to families, SGG is able to provide global solutions and local expertise to deliver tailored wealth planning and structuring solutions to families. SGG also has deep experience in providing entrepreneurial families with an introduction platform for direct investments and delivers Private Equity, Real Estate and corporate finance transactional support.
At SGG, we believe in building relationship of trust and confidence for the long haul with our private and family clients, which has made us the preferred provider of family office support solutions. This year, SGG has set up an independent entity, Aspelt House, dedicated to provide family office support services and to ensure expert, innovative and efficient solutions for families.
by Bas Horsten, Managing Director/Market Leader Caribbean & Latin America SGG Group.
Managing Director/Market Leader Caribbean & Latin America
Kaya W.F.G. (Jombi) Mensing 36, Willemstad
T +599 9 461 12 99 ext 715
M +599 9 566 1914