Wealth Strategies

Distressed Debt, Credit And Fintech Top Of Mind At Family Office Summit

Charles Paikert US Correspondent New York September 23, 2024

Distressed Debt, Credit And Fintech Top Of Mind At Family Office Summit

A summit in Manhattan last week explored issues ranging from the "lousy asset class" of distressed debt to the ever-changing world of fintech. This publication – a partner of the event – was on hand to cover the conversations.

Distressed debt, private credit and fintech were top of mind at The Circulus Family Office Summit, a wide-ranging one-day conference in Manhattan covering investing, technology, the state of the economy, and practice management.

Investing in distressed companies will continue to be a priority for Golden Tree CEO Steve Tananbaum (pictured), the conference’s keynote speaker and one of Wall Street’s more prominent investors. 

Despite describing distress as “a lousy asset class,” investments in selective distressed companies can pay off when the economy is bad or industries such as cable TV are going through a transition, Tananbaum said. Accordingly, Golden Tree has created a “3.0” platform to identify distressed companies with growth potential.

Distress investments were “cyclically driven” and could result in above-market returns, agreed Jason Mudrick, chief investment officer of Mudrick Capital. But potential investors should carefully review liability covenants before proceeding, he cautioned. 

Private credit was cited as one of the most popular alternative investments in the current environment by nearly all the fund managers at the conference. 

When one audience member asked if there was, in fact, a bubble in private credit, Tanenbaum said that with so much money coming into the space, “there will be mistakes and excesses.” Nonetheless, selective private credit investments would continue to be a priority for Golden Tree, he said.

Keen interest in fintech
Not surprisingly, the family office audience was keenly interested in fintech, but too many family offices aren’t doing enough to keep up, according to Erik Christoffersen, managing director at AITi Tiedemann Global.

According to a new family office “operational excellence” report by AITi Tiedemann and Campden Wealth, over two-thirds of family offices reported having difficulty recruiting and retaining IT talent. Well over one-third of family offices said they still relied on spreadsheets and manual aggregation of financial data. Yet only 13 per cent considered failure to upgrade technology as an operational risk. 

Large family offices will need to spend around $1 million annually to keep pace with technology updates, Christoffersen said. What’s more, despite a severe tech talent shortage, too many family offices aren’t paying their tech employees enough compensation, according to the report. Firms need to ask themselves if the value of their talent is reflected in their compensation, Christoffersen said.

When putting together a tech strategy, family offices need to understand the use case for new software and what the pain points in the office are, said Bill Wyman, president of family office services for Summitas

After evaluating vendors’ requests for proposals and before signing a contract, family offices should negotiate penalty fees if the vendor doesn’t meet established deadlines, said Franklin Tsung, CEO of FutureAdvice, a service provider and single family office.

Prospects for the US, China and Europe
Despite the Federal Reserve Board’s recent interest rate cuts, Torsten Slock, chief economist at Apollo Group, still expects “nice [fixed] yields for the next several years” as well as a “very positive outlook for growth in the US.”

Indeed, US leadership in artificial intelligence and government spending on semiconductor chips and infrastructure has allowed the US to pull away from both Europe and China, Torsten said. Europe has been hampered by not being able to achieve a capital markets union, he explained, while China’s aging demographics, depressed home prices and foreign trade wars add up to a “bad cocktail for the economy.”

The Summit was the first educational forum presented by Circulus Group, a consulting and family office strategy firm founded by longtime industry fixture Joe Reilly (pictured below), host of the Private Capital podcast who also co-founded and headed the Family Office Association for four years through 2013.

Joe Reilly

The Summit was the result of  “following my curiosity about investment decision making, and all the non-financial issues in a family office,” Reilly said. “If I’m interested in something, then it is likely others are as well, and if I put on a family office CIO hat and interview top thinkers, people become really engaged.”

Next up for Circulus, Reilly said, is building out a network of families starting in New York and Greenwich, Connecticut.  

Other topics covered at the conference included the future of venture capital and operational efficiency in the family office, which drew primarily on findings from the Tiedemann/Campden report.

Family Wealth Report was a media partner of the Summit.

Register for FamilyWealthReport today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes