Continuous monitoring of investment portfolios requires more than just looking at the figures for the last few quarters.
Professional asset allocation strategy only works with systematic monitoring. It is no longer just a matter of measuring performance, but of identifying market changes and structural shifts at an early stage.
Novum Partners has been observing a change in the way wealthy families monitor their investments for years. Whereas quarterly reports used to suffice, clients now want real-time information and more detailed analyses. The multifamily office has responded by adapting its monitoring systems accordingly. With over 5 billion Swiss francs under management, the Geneva-based company has a sufficient database for meaningful market observations.
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Modern monitoring goes beyond performance
Anyone who still believes that investment monitoring is just a matter of comparing actual and target figures has overlooked something important. Markets have changed. They are faster, more volatile and more interconnected. What worked yesterday may be obsolete tomorrow. Monitoring methods must therefore adapt accordingly.
Family office services often involve assets that are to be preserved for generations. It is not enough to focus on the next twelve months. Long-term trends must be identified before they become problems. Or missed opportunities.
Early warning systems for structural changes
Let’s take an example from the recent past. For decades, energy stocks were considered solid dividend payers. Then came the energy transition. Suddenly, safe havens became volatile speculative investments. Those who recognised this early were able to reallocate their portfolios in time. Those who missed the boat had to accept losses.
Novum Partners SA, formerly known as Novum Capital Partners SA, uses various indicators for this purpose. Not only price developments, but also regulatory changes, demographic trends and technological breakthroughs. Sounds like a lot of effort? It is. But it’s worth it.
The balance between stability and flexibility
Wealthy families face a dilemma. They want stability for their long-term goals. At the same time, they need to remain flexible enough to respond to change. That’s harder than it sounds.
A classic portfolio consisting of 60 per cent equities and 40 per cent bonds works differently today than it did twenty years ago. Interest rates close to zero have devalued bonds. At the same time, equities have been distorted by central bank policy. What remains? Alternative approaches that need to be constantly monitored.
Technology as a tool, not a panacea
Digitalisation has also reached investment monitoring. Algorithms can process large amounts of data. They recognise patterns that humans would overlook. Sounds great, right? But that’s only half the story.
Limits of automated monitoring
Computers are good at calculating. They are less good at understanding contexts that cannot be expressed in numbers. Political tensions, social trends, psychological factors – all important for the markets. All difficult to quantify.
The multifamily office therefore combines technical tools with human expertise. The software provides the data. The analysts interpret it. A division of labour that has proven its worth.
Real-time monitoring versus long-term thinking
Real-time data is tempting. Every price movement, every news item, every change is immediately visible. But be careful: if you look too often, you often make the wrong decisions. Behavioural finance calls this ‘overconfidence bias’.
At Novum Partners SA, we therefore distinguish between short-term signals and long-term trends. Not every market movement justifies a portfolio adjustment. Sometimes waiting is the better strategy.
Monitoring alternative investments correctly
Private equity, hedge funds, real estate, commodities – alternative investments are complex. So is monitoring them. While equities can be valued on a daily basis, private equity often does not produce new figures for months. Frustrating? Sometimes.
Transparency for illiquid investments
This is one of the biggest challenges in modern asset management. How do you monitor investments that cannot be valued on a daily basis? The answer lies in other indicators.
In private equity, there are operational key figures for the target companies. Sales development, market shares, employee numbers. In real estate, these are rental developments, vacancy rates and construction projects in the surrounding area. Not perfect, but helpful.
Correlation monitoring is key
One of the most important aspects of alternative investments is their correlation with traditional markets. In theory, they should develop independently. In practice? Often not so easy.
The 2008 financial crisis showed that in extreme situations, all asset classes suddenly correlate. Diversification then no longer works. Recognising such phases at an early stage is worth its weight in gold. Or, in this case, worth its weight in money.
Reporting between information and overload
Clients want to be informed. But how much information is enough? And how much is too much? The multifamily office Novum Partners has developed different approaches depending on client requirements.
Individualised reporting
Some family members are interested in every detail. Others only want the most important, key figures. Still others do not want to be informed regularly, but only when important events occur.
The solution? Modular reporting systems with different levels of detail:
- Executive summaries for decision-makers with little time
- Detailed reports for interested family members
- Comprehensive analyses for investment committees
- Special reports for exceptional events
This requires more effort to produce. But it leads to more satisfied customers.
Visualising complex relationships
Columns of figures are boring.
Graphics are more intuitive. But be careful: not everything can be visualised in a meaningful way. Sometimes a table is more informative than a colourful diagram.
Novum Partners SA Geneva uses different forms of presentation depending on the content. Performance developments as line charts. Asset allocation as pie charts. Risk indicators as traffic light systems. It works, but is customised to suit individual needs.
Credit advice from a monitoring perspective
Credit lines also need to be monitored. Interest rate developments, covenant breaches, collateral valuations – everything can change quickly. This becomes particularly complex in international structures.
Monitoring credit risks
Anyone who takes out a loan assumes obligations. These must be met. Sounds obvious? Not always so simple with complex structures. Currency fluctuations can devalue collateral. Regulatory changes can influence covenants.
The Geneva-based company has developed its own monitoring system for this purpose. Important key figures are monitored automatically. Immediate warnings are issued in the event of deviations. This allows problems to be solved before they arise.
International monitoring for advice on new yachts
Yacht financing is particularly complex. Different countries, different currencies, different legal systems. What’s more, yachts move around. Today in Monaco, tomorrow in the Caribbean. This has an impact on tax and legal aspects.
Novum Partners, formerly known as Novum Capital Partners SA, monitors such structures particularly closely. Locations are tracked, insurance policies are checked, and tax implications are assessed. It’s time-consuming, but necessary.
The future of investment monitoring
Artificial intelligence, machine learning, big data – these are the buzzwords of the financial industry. But what do they mean in practical terms for the monitoring of investment portfolios? Much is still experimental. But the direction is clear.
Predictive analytics in practice
Can computers predict the future? No. But they can calculate probabilities. This is certainly helpful for certain scenarios. For example, when monitoring concentration risks or liquidity bottlenecks.
The multifamily office is testing various approaches. Some work, others don’t. Learning by doing, you might say. But with the appropriate caution.
The human touch remains important
Despite all the technology, it is ultimately humans who make the decisions. Computers can support, analyse and warn. But the final responsibility lies with the advisors. And that will remain the case.
Investment monitoring has become more than just performance measurement. It has become a decisive factor for success in asset management. Those who do not monitor systematically today will face problems tomorrow. Or miss opportunities. Both cost money.
