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Ultra-Rich Families Poised for Spending Splurge After Stock Rout

More than a third of family offices boosted their cash reserves last year as they bet on a global recession in 2020.

(Bloomberg) -- Abe Tatar is on alert.

The managing director of Demira Gate Partners, the New York-based investment firm of a European family that made its fortune in luxury products, is closely watching consumer goods, hospitality and oil companies amid the Covid-19 pandemic.

But while many investors are still tallying losses from these businesses after the worst stock rout in more than decade, Demira Gate is considering a buying spree.

“We remain opportunistic as there are many attractive opportunities to monitor and capitalize on,” Tatar said. “We may increase certain positions across sectors in multiple tranches in the coming weeks and/or months.”

Demira Gate joins a number of cash-rich family offices poised to benefit from tumbling markets as world leaders grapple with a virus that has infected about 180,000 people globally since emerging in Wuhan, China, at the end of last year.

More than a third of family offices boosted their cash reserves last year as they bet on a global recession in 2020. Instead, they got a surprise market meltdown, and a worldwide recession now looks increasingly likely as scores of countries shut borders, order business closures and keep workers at home to contain the outbreak.

“What’s horrified me is how the whole world order has broken down so quickly,” said Louise Adams, head of London-based family office Corniche Group. “There’s no doubt that huge amounts of wealth will be created out of this pandemic.”

Read more: Citigroup’s wealthy clients are snapping up structured notes

The number of family offices has surged since the 2008 financial crisis, typically managing for the wealth of a single clan. The average family office had assets last year of $917 million, according to UBS Group AG and Campden Wealth, and represent a select group of investors who can adopt a long-term view during periods of market turmoil.

Evgeny Denisenko, whose Monaco-based family office Apolis slashed its exposure to public markets last year, said he’s currently looking for bargains in private credit after earlier focusing on non-bank lending to companies in industries such as outsourcing, oil and real estate. He said he expects good opportunities in the near future.

The founder of Shanghai-based Viva Ventures, Jun Mao, said she’s on the lookout for “rare entry points.” The firm manages about $500 million, most of which came from her family’s biotech fortune.

“When valuations of your target industries and companies drop and become reasonable, opportunities present themselves,” Mao said.

Read more: Family offices, chasing $64 trillion, making inroads in China

It’s a similar case with the U.K.’s Beckwith clan, who made their money in property and finance.

Their Pacific Investments Ltd. is sitting on a cash pile after selling real estate developments in recent months and shares in last year’s initial public offering for London-based currency-services firm Argentex Group Plc.

They’ve also managed to avoid some of the pandemic’s sharpest effects. In France, where the Beckwiths once owned nightclubs and luxury hotels, the government has ordered the closure of cafes, restaurants and all non-essential businesses.

Still, the Beckwiths are taking their time with how to invest their recent windfalls.

“This crisis will present many opportunities at some point,” said Piers Beckwith, who sits on the family office’s board. “But for now cash is king.”

Peter Hargreaves is also sitting on a pile of cash. The British billionaire has put money into U.S. and U.K. assets after selling shares last month worth 550 million pounds ($663 million) in Hargreaves Lansdown Plc, the online investment platform that made his fortune.

“By hell, the timing was just phenomenal,” he said in a phone interview last week.

--With assistance from Zhang Dingmin.

To contact the reporter on this story:
Ben Stupples in London at [email protected]

To contact the editors responsible for this story:
Pierre Paulden at [email protected]
Steven Crabill

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