Time for family offices to step up for ultra-high-net-worth clients

Economic and market uncertainty provide perfect crucible for differentiated offerings, says Samara president and CEO

Time for family offices to step up for ultra-high-net-worth clients

It’s been almost two years since Samara Multi-family office announced its grand scheme to transform Canada’s family office space. Since then, the business has grown by leaps and bounds.

“We’ve almost doubled our business in terms of AUM and in terms of employee size,” says Michael Grondin, president and CEO at Samara. “It’s been very busy and productive, and also very challenging.”

More recently, the firm formally struck a partnership agreement with CEOS Family Office. Under the agreement, which is still subject to regulatory approval, Samara’s clients would now be able to access a full suite of family office services, including accounting and administrative concierge services.

Our entire purpose in founding Samara was to address our clients’ needs, specifically across four pillars: family continuity, integrated planning, global investment, and administration,” Grondin says. “One thing we needed to access, acquire, or just build internally was the capability to deliver the administrative aspect of our framework. And I think with the CEOS partnership, we can more confidently differentiate ourselves in the market.”

Over the past year, he says Samara has been beset by the same challenges as other investment firms and family offices due to the volatility of the markets. While clients of many other firms saw negative 10% or 20% returns in their portfolios last year as both stocks and bonds sank, Grondin says Samara’s clientele that have integrated alternative assets got through the storm of 2022 with flat portfolio performance thanks to their institutional-style diversification.

“Last year, performance in bonds was between minus 5% to minus 15%. In comparison, senior-secured private debt, which is mainly based on floating-rate notes, have returned 8% to 12%,” he says. “There’s more risk in private debt than in regular fixed income, but in relative terms of volatility and returns, last year was a very good year.”

Returns in the private equity space are more widely dispersed than in public equities, Grondin notes. Since there’s no marked-to-market pricing and little depth in the PE space, he says comparing PE returns to those in the public stock markets is challenging, though he believes the private space was less volatile than public markets.

“We have to be very selective when it comes to investing in the PE space. It’s been a darling among growth-oriented investors over the past five years,” he says. “We’re currently favouring a few managers in the secondary market of private equity rather than primary funds. We believe the tremendous growth in secondary offerings on the part of institutions and pension plans is creating a great opportunity for investors … it will be interesting to see how the PE market evolves in the next five years.”

Private infrastructure and real estate shone in 2022, with returns ranging from 7% to 13% for core-plus infrastructure and 8% to 15% in private multi-residential and industrial real estate, respectively. They have proven to be good substitutes to other fixed-income securities, Grondin notes, as the yield they throw off aren’t taxed in the same way.

Last year was also very good for hedge funds, but it’s difficult for us at Samara to find the right managers who get consistent returns over time,” he says. “The alternatives we’ve chosen in the private space have offered better risk-return and diversification characteristics, but we’ll see what happens in the future.”

Looking ahead, Grondin says family offices can serve clients in the way that they want and need to be served. That includes providing holistic and comprehensive wealth planning services, investment sophistication and diversification, and consolidated reporting of their financial and non-financial assets. 

“All the prospective clients who approached us in the last year and a half have said ‘I want someone who will be there for us, who can understand and show us the full picture of our financial and non-financial wealth, and who can offer integrated services and the right diversification for our families,’” he says. “Those same needs are driving high-net-worth clients in Europe and the United States, and I think those trends will be positive for us in the next few years here in Canada.”