The family: governance and investment

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We have great pleasure in introducing this third Pictet Report, which focuses on family governance and investment markets in the post-crisis era. These themes were discussed at a two- day informal symposium in the Swiss Alps which brought together families from around the world in late March this year. The following pages summarise a unique discussion of the particular challenges that face families in portfolio organisation and governance. They also offer a variety of perspectives on the global investment environment and the impact of the great credit crisis on a range of asset classes.

The events in the markets over the past three years have tested the resolve of almost every investor, but the tensions can be more difficult to resolve in the context of a family. Informing the discussions at the symposium was a presentation that emphasised the importance of the individual talents of family members. These assets—their ‘capacities’—are too often overlooked, weakening the ability of a family to preserve wealth through the generations. Participants offered their own experiences of how they discovered the importance of such assets in their family portfolio.

The symposium also analysed the macroeconomic impact of the crisis and its consequences for a range of asset classes. The presentations of the distinguished speakers and experts who led the discussions are summarised in the following pages, along with the insights of Pictet’s strategic thinkers on the lessons from the past decade and the Bank’s own investment approach for the post-crisis world.

Finally, the symposium considered what can be learnt from the relatively new discipline of behavioural finance, and how it can be applied in managing family portfolios.

Of particular interest was the idea that the exceptional stresses suffered by investors as the crisis unfolded were easier to handle when investment strategies combined an understanding of how humans actually behaved, rather than simply the rational model assumed by classical economics.