Family offices find an appetite for credit risk

Family wealth funds are dumping hedge fund positions and taking control of their own investment decisions. But as some move into direct lending – to replace retreating banks – they face new risk management challenges. Peter Madigan reports


It might sound like the kind of vague maxim found inside a fortune cookie: “Wealth does not pass three generations.” In fact, this old Chinese proverb is closer to a universal rule, according to bankers who work in an advisory capacity to family offices – the operations established by rich families to guard and grow their wealth.

“Around 90% of family wealth is destroyed by the third generation,” says David Barraclough, managing director in the family offices advisory business at HSBC in London

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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