Just over a year ago I took a look at The 10 most influential trends in the private wealth space. With the economic landscape having seen some major developments over the last 12/14 months I took a little time to reflect and review some of my observations.
Although real estate has traditionally been viewed as a largely strategic asset class and means of wealth preservation, there are increasing demands for investors to contribute to urban wellbeing post-pandemic. We have seen an uptick in the number of investments in the field of ‘co-working space’ and collaborative office environments. In particular, there is a demand for quality flexible space in locations that offer a vibrant mix of office, residential, retail, leisure and culture. In what has been described as an exodus from London, real estate investors are also increasingly choosing to invest in gateway cities like Birmingham.
ESG and family office impact investing has garnered significant traction in the investment world as next-generation wealth owners leverage their capital to increase social and environmental returns. We have observed an increase in the number of transactions involving investee businesses that are considered disruptive in their industry. Recent transactions have included investments in a vegan yoghurt brand as well as a producer of renewable fuels from end-of-life tyres.
Alternative asset classes
Recently there have also been some changes to asset-class definitions and allocations. We are seeing interesting new portfolio additions as private clients navigate opportunities and risks in the global economy.
For example, family offices have been seeking to capitalise on emerging asset classes such as digital assets. With their longer-term strategic viewpoints, and perhaps also driven by FOMO, we have seen HNWIs and family offices begin to add cryptocurrencies, crypto funds and even NFTs to their portfolios.
Geopolitical, legal and tax matters in relation to HNWIs and family offices
Recently imposed sanctions on Russian oligarchs have resulted in increased scrutiny and awareness about the ‘super-rich’ as a class. Significantly, a law introducing a register of beneficial owners of overseas entities (which expressly includes companies and partnerships) that own property in the UK has been fast-tracked through the UK Parliament “in consequence of recent events in Ukraine”: on 15 March 2022 the Economic Crime (Transparency and Enforcement) Act 2022 was ratified into law. Although the scope, application and procedural points arising from this new law have yet to be clarified, HWNIs and family offices with real estate assets situated in the UK should be mindful of the enhanced reporting requirements and consult their trusted advisors as necessary.
Separately, a public row over the non-domicile status of Chancellor Rishi Sunak’s wife Akshata Murty has brought the issue of preferential tax regimes into the public eye. Although there is no implication that the current rules relating to non-domiciled status will change, HWNIs should regularly check that their tax affairs remain efficient and watertight.