- The transfer of wealth from baby boomers to new generations presents challenges in wealth management.
- Family offices are essential for preserving and maximizing capital during this wealth transfer and require financial vehicles to achieve these goals.
- Securitization allows the conversion of both liquid and illiquid assets into listed securities, enhances distribution in international capital markets, and facilitates capital raising for investment strategies.
- FlexFunds facilitates the design and issuance of investment vehicles (ETPs), simplifying distribution and access to international private banking.
Wealth management becomes a key element amid one of the world’s largest wealth transfers from baby boomers to millennials and Gen Z. In this context, establishing a diversified portfolio that can exploit various market trends is strategic. FlexFunds explains why.
The world is experiencing what is considered one of the most significant capital transfers as baby boomers hand over the reins to new generations in business and wealth management. Estimates suggest that in the next decade, the U.S. alone will see a transfer of $90 trillion, according to consulting firm Knight Frank1.
A survey conducted in the U.S. by USA Today indicates that Generation Z and millennial heirs expect to receive an average transfer of $320,0002. About 68% of members of these generations anticipate receiving some form of inheritance.
A capital transfer of $90 trillion is expected in the next decade in the U.S., primarily from baby boomers to new generations.
Amid this global phenomenon, the challenges now focus on managing this substantial flow of money, particularly in preserving and maximizing capital. Asset managers, especially family offices focused on preserving family wealth, will play a crucial role in the great global capital transfer.
According to the North America Family Office Report 20233, cited by Forbes, North American family offices manage assets totaling around $1.72 trillion, marking a 14% increase from the previous year.
Integrating a diversified, solid portfolio with broad distribution will be decisive for these family wealth managers to meet their objectives in a challenging economic environment due to high inflation and interest rates that remain high. In this context, FlexFunds emerges as a strategic partner through its investment vehicle issuance, corporate administration, and fund accounting services.
To achieve greater reach and diversification of the portfolio, FlexFunds supports asset managers through its securitization platform in designing and issuing investment vehicles (ETPs), simplifying their distribution and access to international private banking. The company offers a securitization program that allows for the securitization of various assets, converting both liquid and illiquid assets into listed securities, enhancing distribution in international capital markets, and facilitating capital raising for investment strategies.
Securitization encompasses a wide range of assets, including stocks, bonds, commodities, loans, and intellectual property.
Securitization within family office portfolios
For instance, in the global wealth transfer, heirs are expected to receive illiquid real estate assets and other properties that need to be capitalized through various investment instruments managed by family offices.
One tool for this purpose is securitization, as it serves as a means to convert illiquid assets, such as future income receivables from real estate, into tradable securities in the market, providing liquidity and financing for the development of new projects that maximize wealth.
The process involves pooling together a series of real estate assets, such as residential and/or office buildings, to subsequently transform or repackage them into tradable securities, which are commercialized and generate returns for their buyers.
For example, if a high-net-worth family seeks to finance the construction of new properties to increase their stake in real estate, they can securitize discounted cash flow sources such as rental income to obtain the capital they need.
Securitization converts real estate assets and other properties into listed securities, providing financing for new projects.
How does securitization bring liquidity to your portfolio?
Securitization offers significant possibilities for portfolio diversification and allows converting a variety of assets—ranging from stocks, bonds, and commodities to derivatives, currencies, loans, contracts, and even intellectual property—into financing.
This financial instrument provides access to alternative sources of financing while offering a higher degree of liquidity to portfolios compared to traditional vehicles. It also opens up exposure to other assets for investors and allows risk mitigation, although it is a complex instrument and requires consideration of each investor’s profile, portfolio characteristics, and needs.
One of the qualities of this instrument is its significant degree of customization based on factors such as each investor’s risk profile, allowing portfolios to be tailored to their objectives and enabling them to invest in a diverse range of underlying assets available in securitization.
Experience in structuring these vehicles is key, but family offices may not necessarily have a profile oriented toward this goal or simply lack the necessary resources, so they turn to firms like FlexFunds, which specializes in both the creation and launch of investment vehicles.
FlexFunds’ ETPs offer customization and efficiency in managing investment strategies for family offices and other asset managers.
FlexFunds provides a securitization program to create listed products (ETPs), facilitating the development of investment strategies by family offices in a practical and efficient five-step process: personalized assessment, due diligence, structuring, issuance and listing, and trading on Euroclear.
In addition to family offices, FlexFunds’ ETPs offer multiple applications to portfolio managers, fund managers (hedge funds, private equity, venture capital), alternative asset managers, real estate managers, and industrial corporations, among others.
This is why integrating securitization into family office portfolios is crucial for managing the large wealth transfer between generations, converting illiquid assets into financing, and offering liquidity and diversification. FlexFunds emerges as a strategic ally, facilitating this process with its securitization program and specialized services.
