{"id":7194,"date":"2019-10-09T08:41:00","date_gmt":"2019-10-09T08:41:00","guid":{"rendered":"https:\/\/iqeq.com\/?p=7194"},"modified":"2024-04-08T08:46:50","modified_gmt":"2024-04-08T08:46:50","slug":"why-family-funds-make-sound-wealth-management-structures","status":"publish","type":"post","link":"https:\/\/iqeq.com\/insights\/why-family-funds-make-sound-wealth-management-structures\/","title":{"rendered":"Why family funds make for sound wealth management structures"},"content":{"rendered":"
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Families and family assets are increasingly mobile, based in various jurisdictions and subject to a variety of laws and regulations. A family\u2019s main challenges, among others, are to ensure a reasonable return on equity, business continuity over the foreseeable future, as well as sound family governance.<\/strong><\/p>\n

There is a variety of structures families can choose to commit their assets to, each with its own attributes and uses. In this article, I shall focus on the specific characteristics and merits of a family fund \u2013 an institutional framework for private wealth.<\/p>\n

What is a family fund?<\/h2>\n

Simply put, a family fund is a closed-ended (or indeed sometimes open-ended) structure set up for family members. The units or shares of the structure are only accessible to the participating members of the family or their wealth administrators.<\/p>\n

Funds are popular among wealthy families, investment club members and other partners looking to keep wealth together and invest in a range of asset classes on a collective basis. They allow assets to be consolidated, providing a clearer view of the collective pool of wealth.<\/p>\n

Importantly, a fund is a \u2018tax neutral\u2019 structure that limits debate around the allocation of capital gains\/income by virtue of being a see-through structure that places taxability squarely on the shoulders of the investors.<\/p>\n

A fund structure also provides an independent and professional framework to help safeguard the family\u2019s assets and tailor individual family members\u2019 income. Wealthy families may not have the expertise or the time to make well-founded investment decisions. They may therefore appoint 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 \u2013 with each appointment serving to ensure industry best practice and compliance with local and international regulations.<\/p>\n

Further, funds can be compartmentalised, making it possible to select several managers or management companies within a single fund, and thus meet the various requirements of different family members. For example, this can be used to allow certain family members to invest in fixed income instruments that are linked to debt financed underlying asset classes if their cash flow needs so dictate. Vice versa, tailored entities can be structured in between the fund and individual investors for specific planning purposes.<\/p>\n

A fund can also be structured and operated to meet changing investment objectives in a shifting economic landscape. Shares in a fund may be held by a securities account or even a life insurance contract. They can also be held in a trust or foundation for asset protection and succession planning purposes.<\/p>\n

When can you use a family fund?<\/h2>\n

Family fund structures suit multiple purposes and can be used in a variety of situations. A family fund is a particularly apt choice when seeking to:<\/p>\n