The strategy will be co-advised by Franklin Templeton and Lexington Partners.

George Szemere, Head of Alternatives EMEA Wealth Management, says: “This upcoming launch will mark an important milestone for Franklin Templeton, in line with our commitment to build a diversified, market-leading alternatives business globally. Leveraging Lexington’s world-class investment expertise, we are excited to bring to market this new offering that will broaden access to private markets whilst offering wealth managers a more robust and sophisticated toolbox to help clients accomplish their long-term goals. This new offering is testament to our long history of innovating and providing investors with unique solutions to meet their evolving needs.”

The firm writes that the new open-ended strategy will be Luxembourg-domiciled and provide investors, principally in the wealth channel, access to a diversified private equity secondaries portfolio. The strategy will allow access to an asset class that, until recently, was primarily available to institutional investors, and to a lesser extent, the wider market, the firm says, adding that it is scheduled for launch in early 2025.

Franklin Templeton writes that private equity secondaries are a rapidly growing segment of the broader private equity market and an important source of liquidity for investors. They give wealth investors the opportunity to gain private equity exposure and can serve as a useful diversification tool to actively rebalance portfolios, the firm says.

Wil Warren, Partner and President, Lexington Partners says: “We are excited to partner with Franklin Templeton on this new strategy. This partnership is a significant step, enabling us to offer our investment strategy to the wealth channel. We look forward to working together to provide investors with access to a diversified private equity portfolio with a focus on long-term capital appreciation.”

The opportunity in private equity secondaries

Franklin Templeton writes that private equity fundraising has surged in recent years. “However, private equity (PE) exits slowed dramatically in 2022 and 2023 and continue to be relatively stagnant. While PE deals and exits have slowed, secondaries activity has picked up as institutional investors seek to rebalance their portfolios.

“Many institutions committed significant capital to PE in the last decade, given the potential for meaningful returns. In response to the positive liquidity environment of steady distributions experienced by institutions during that time period, they increased their allocations to private investments. As institutions now find themselves overallocated to PE with distributions slowing, they are accessing the secondary market to diversify their holdings and meet future commitments. In addition, secondary managers benefiting from significant inventory and institutions’ need for liquidity, have been able to select from broad pools of assets that are seeking attractive investment interests at favourable pricing. 

“The secondaries market has grown substantially over the last decade, from USD28 billion of market volume in 2013 to approximately USD130 billion in 2024. Secondaries represent a growing and vital part of the private equity ecosystem, providing liquidity, diversification, and potentially shortening the distribution period.”

Jake Williams, Head of International Alternatives Product Strategy, notes: “Over the last few years, the industry has made great strides in opening up access to private markets through the introduction of various fund structures. We have been working to develop a product that enables access to private markets while providing a degree of liquidity through periodic subscriptions and redemptions which are supported through a variety of liquidity levers. With this new open-ended fund structure, we are pleased that we will be able to offer investors in the wealth channel access to private markets with lower investment minimums and more flexible features.”

“As this year’s results show, the impact of the global pandemic has settled into a ‘new normal’. However, inflation, rising living costs, and increased geopolitical tensions continue to impact prices and priorities globally,” the firm says.

In 2024, price rises have slowed to 4 per cent on average in US dollar terms, compared to 6 per cent in 2023. Prices this year grew faster for goods than services, with goods up 5 per cent on average and services up 4 per cent, both in US dollar terms.

The firm writes that although cities continue to become more expensive, they have seen a normalisation of inflation rates over the past 12 months.

The city ranking is based on the Julius Baer Lifestyle Index, which analyses the cost of a basket of goods and services representative of ‘living well’ in 25 cities around the world.

Regional findings

While Singapore (1st, unchanged) and Hong Kong (2nd, up from 3rd) still dominate the podium, the Asia Pacific (APAC) region drops down the regional ranking to 2nd place for the first time, due to lower rankings for cities like Tokyo, and a very strong return to prominence for Europe, Middle East and Africa (EMEA). Last year, EMEA was the cheapest region to live well. This year, driven by London taking the 3rd spot (up from 4th) and every single European city moving up the ranking, as well as strong exchange rates vs. the US dollar (Euro +4 per cent, Swiss franc +8 per cent), EMEA is the most expensive region to live well. Although the Americas fall to last place, both New York and São Paulo remain in the top 10.

The firm writes that significant price increases over the past 12 months have helped to position EMEA as this year’s most expensive region. In this year’s index, Zurich climbed eight places, while Milan and Paris rose by six and five places respectively. London has overtaken Shanghai to take 3rd place.

Asia Pacific (APAC) is home to the two most expensive cities in our index – Singapore and Hong Kong. However, falling prices in some cities – Tokyo in particular (23rd, down from 15th) – mean the region is no longer the most expensive. Bangkok and Jakarta, which have been rising in the ranking over recent years, have now tumbled down from 11th to 17th and 12th to 14th respectively. Shanghai has fallen to 4th place after holding the top spot in 2022 and 2021. Sydney (11th) has jumped six places globally following inflationary surges and is, together with Hong Kong, the only riser in our ranking in APAC this year.

The Americas have fallen back to the bottom of the ranking, following a brief sojourn in second place last year. New York (7th, down from 5th) and São Paulo (9th, unchanged) remain in the top 10, but Miami has dropped to 15th place (down from 10th). On the other hand, Mexico City (16th, up from 21st place), has leapfrogged five places due to the strength of the local currency.

The firm writes that currency fluctuations have overall played a significant role with regards to the biggest risers and fallers in the index this year. “While costs have often barely changed in local currency, the conversion to US dollar (USD) made the difference. Index prices are converted to USD to allow for global comparison, and the strength of currencies such as the Swiss franc and, conversely, the poor performance of currencies such as the Japanese yen are clearly seen in the performance of these cities in USD terms.”

Christian Gattiker, Head of Research, Julius Baer, says: “This year’s report shows that currencies matter a lot. Take Tokyo as an example. This used to be the posterchild of an ultra-expensive city in the 1990s. However, the steady decline of the yen has shown how this can change. As trivial as it seems, we tend to forget that the costs of living look completely different in the eyes of a stranger – especially if that person thinks in US dollars or Swiss francs instead of the local currency. Currency and context matter.”

Having dropped off the podium in the 2023 Lifestyle Index, London now returns to being one of the priciest global cities for living well, leading this year’s trend for European cities climbing the ranking.

Commenting on the result, Jamie Banks, Head of Wealth Planning UK, says: “Over the past year, the inflationary environment in the UK has meant sustained higher living costs for all levels of consumer, as prices for everything from staples to luxuries have remained elevated. This year’s results show the premium paid for education, hospitality, and legal services, as well as luxury fashion items, in London, that can be attributed to increasing labour, goods, and real estate costs.”

Despite these higher costs, the 2024 Lifestyle Survey shows a thirst for travel, hospitality and luxury retail that is likely to continue growing in the coming year, with the trend for personal enjoyment particularly strong in Europe. However, economic, geopolitical, and social wariness mean the wealthy are also keeping one eye on their finances.

“While the lifestyle budgets of the wealthy are significant, and there is strong desire to travel, socialise, and shop, the increased cost of living well has meant reinforcing financial structures to guarantee levels of income while indulging in discretionary spending”, continues Jamie Banks.

“As a city, London retains its attractiveness for quality of life, economic opportunity, and relative stability, compared to European and international rivals. However, recent legislative changes, a prospective change of government, and the significant cost for items such as premium property, medical services and education, risk dampening its draw for wealthy individuals and families.”

Turning to single index items, EMEA is the most expensive region to own a home, with residential property prices 17 per cent above the global average. Fine dining is 13 per cent more expensive than elsewhere and MBAs are significantly more expensive (24 per cent), driven by the high prices charged by all European cities. In the luxury fashion sector, men’s suits, ladies’ shoes, and ladies’ handbags in EMEA are now 15 per cent, 14 per cent, and 11 per cent more expensive respectively in USD terms than a year ago. Overall, prices were up 7 per cent on average in EMEA.

While on average across Lifestyle Index items London has only seen a 4 per cent year on year price increase in GBP, this overlooks the fact that many items’ prices are among the highest of all cities, so even small increases can significantly affect affordability. Hotel suites in the British capital have seen the biggest price increase YoY in GBP (+31 per cent), which, coupled with the slew of super-premium properties that have recently opened in the city, suggests that London retains its draw for tourists. Conversely, for London residents wishing to escape abroad, the price of business class flights (-17 per cent) has fallen YoY, although this could be attributed to rebalancing following the disruption to travel during the pandemic years.

Stylish individuals will not be pleased that fashion and luxury goods such as shoes (+15 per cent), handbags (+11 per cent) and jewellery (+11 per cent) have all seen double digit price increases in the last year, greater than in rival European fashion capitals such as Milan and Paris, the firm writes.

For those in London who prefer a fine Whisky or Champagne, there is some good news as the price of Whisky (-19 per cent) has significantly decreased YoY, while for Champagne the city is among the most relatively affordable places in the world to pop a cork.

There have been some significant price falls in APAC over the past 12 months. The most extreme example of this is the 14 per cent fall in the cost of business class flights, the biggest regional decrease for an item this year compared to last year. However, this appears to be a correction to the sky-high fares in 2022 and early 2023. On the other hand, APAC residents pay more for jewellery and private school compared to last year (both up 10 per cent), although it costs less to buy a bicycle (-13 per cent) or rent a hotel suite (-11 per cent). On average, prices in APAC increased 1 per cent.

The Americas are the most expensive region for healthcare-related costs, at 86 per cent more than the global average. It is also significantly more expensive than the global average for champagne (27 per cent), whisky (22 per cent), and bicycles (9 per cent). The Americas also lay claim to the most extreme regional increase for any item year-on-year: hotel suites were up almost 34 per cent compared to 12 months ago in US dollar terms. Average prices in this region rose by 6 per cent.

The Lifestyle Survey delves into the lives and consumption trends of HNWIs (high-net-worth-individuals) in 15 countries in Europe, APAC, the Middle East, Latin America, and North America. The survey also examines shifts in consumption patterns and interrogates the reasons behind these changes. In doing so, it paints a broader picture and provides insights and data which substantially augment the Lifestyle Index, the firm writes.

Across all regions surveyed, HNWIs’ demand for leisure travel, fine dining and luxury hotels surged and is projected to increase further. HNWIs want to indulge themselves in a way that recalls the post-war rebounds of the 20th century. HNWIs in APAC and the Middle East led the growth and will continue to do so in the future. Among HNWIs in the Middle East in particular, we will see a concentration on luxury goods such as clothing, watches, and residential property.

The firm says that, as noted in last year’s Global Wealth and Lifestyle Report, the trend for health as the new wealth is continuing to gain momentum. Health spending featured in the top five for all regions when it came to spending intentions for the next 12 months and it remains a key focus globally. HNWIs, particularly in APAC, will focus their investments on healthcare.

“As in previous years, and not surprisingly, the primary financial goal among our respondents is wealth creation and increasing assets. In all regions, HNWIs invested more in the past 12 months than in the year before, with the Middle East and APAC leading the charge.”

At least 70 per cent of HNWIs surveyed globally experienced an increase in the total value of their assets in the past 12 months, especially in North America, the Middle East, and Latin America.

Supported by their own financial expertise and increased asset values, HNWIs from APAC, the Middle East and Latin America have increased the risk level of their investments, while conservatism and fragility prevails in Europe and North America.

While personal enjoyment remains a key pursuit, sustainability plays a greater role in investment strategies in 2024 for almost all HNWIs in APAC, the Middle East, and Latin America. More responsible investments have been made in these three regions, with the majority of HNWIs having reviewed their portfolio to understand the ESG impact of their investments, with a significant higher ESG orientation than in Europe and North America. However, what is true for investments is not true for goods, as sustainability still plays a minor role in actual purchasing habits, the firm says.

“While HNWIs still want to indulge themselves, they are also seeking to empower themselves by prioritising health, aesthetics, and the acquisition of cutting-edge technology. They want to take long-term bets by acquiring property, particularly HNWIs in the Middle East. With demand still outpacing ethics, the challenge will be to encourage HNWIs to fully integrate sustainability into their life and investment decisions, in all markets.”

The firm writes that Indosuez Funds – Impact is a solution offered to equity investors looking for meaningful routes into ESG investing. Each investment is carefully assessed for its potential to contribute positively to the achievement of at least one of the UN’s Sustainable Development Goals, whether it is working on health, food, or social and financial inclusion needs, supporting the environmental transition, or promoting the circular economy and digital access.

“In tangible terms, selected impact companies are assessed using an internal methodology based on three dimensions:

•               Intentionality: ensure that the company contributes to a sustainable development issue and has a positive and measurable social and/or environmental benefit;

•               Materiality: verify that intentionality is followed by actions that have a real impact on the objectives set;

•               Measurability: ensure that social and/or environmental externalities are measurable, in particular through a transparent impact report.”

Companies’ contributions to the various issues addressed by the Indosuez Funds – Impact fund will be detailed each year in an impact report using qualitative and quantitative metrics. This report will be made available to investors, in order to tangibly illustrate the impacts generated by their investments.

Based in Paris, the fund’s management team makes use of in-house ESG and impact analysts and receives support from all of Indosuez Wealth Management’s experts, including local knowledge from experts located in the various Group entities.

Delphine Di Pizio-Tiger, Global Head of Asset Management at Indosuez, says: “Our clients are increasingly keen to invest in companies running projects with a positive impact on the environment. We ensure this, including through transparent and targeted reporting that allows us to check the positive social or environmental impact of companies on the real economy.”

According to the report, global HNWI wealth expanded by 4.7 per cent in 2023 reaching  USD86.8 trillion. Similarly, the HNWI population increased by 5.1 per cent to 22.8 million globally and continues to grow despite market unpredictability. This upward trend offsets last year’s decline and puts HNWI trends back on a growth trajectory.

HNWI growth soars globally

In 2023, North America registered the strongest HNWI recovery worldwide with year-on-year growth at 7.2 per cent for wealth and 7.1 per cent for population. According to the report, solid economic resilience, cooling inflationary pressures, and a formidable US equity market rally drove momentum. This trend continues in most markets, for both wealth and population respectively, but to a lesser extent:

–      The Asia-Pacific HNWI segment (4.2 per cent and 4.8 per cent) and Europe (3.9 per cent and 4.0 per cent) experienced more modest wealth and population growth.

–      Latin America and the Middle East recorded limited HNWI growth, with wealth up 2.3 per cent and 2.9 per cent, and population up 2.7 per cent and 2.1 per cent.

–      In contrast, Africa was the only region where HNWI wealth (-1.0 per cent) and population (-0.1 per cent) fell due to falling commodity prices and declining foreign investment.

As HNWI growth thrives, asset allocations are starting to shift from wealth preservation to growth. Early 2024 data reveal a normalisation of cash holdings to 25 per cent of portfolio totals, a stark contrast to the multi-decade highs of 34 per cent seen in January 2023. The report indicates two out of three HNWIs are planning to invest more in private equity during 2024, to leverage possible future growth opportunities.

Ultra-high-net-worth individuals (UHNWIs), the most concentrated among the wealth bands, hold over 34 per cent of total HNWI wealth and make up just over 1 per cent of the total HNWI population. It is estimated that, over the next two decades, aging generations will transfer over  USD80 trillion, driving appetite for financial (investment management and tax planning) and non-financial (philanthropy, concierge services, passion investments and networking opportunities) value-added services, representing a lucrative opportunity for wealth management firms. The report reveals 78 per cent of UHNWIs consider value-added services essential and over 77 per cent count on their wealth management firm to support them with their inter-generational wealth transfer needs. As HNWIs seek thoughtful guidance, 65 per cent say they are concerned about the lack of personalised advice tailored to their changing financial situation.

“Clients are demanding more from their wealth managers and the stakes have never been higher. There are active steps firms can take to engage and retain clients for a personalized, omnichannel experience as the great wealth transfer unfolds and growth of HNWIs continues,” says Nilesh Vaidya, Global Industry Head of Retail Banking and Wealth Management at Capgemini. “While the traditional way of profiling clients is ubiquitous, the application of AI-powered behavioural finance tools, using psychographics, should be considered. They can offer a competitive advantage by understanding individuals’ decision-making to deliver a greater degree of client intimacy. The creation of channels for real-time communication will be crucial to manage biases that sudden, volatile market movements might trigger.”

More than 65 per cent of the HNWIs reveal biases influence investment decisions, especially during significant life events such as marriage, divorce, and retirement. As a result, 79 per cent of HNWIs want guidance from relationship managers (RMs) to help them manage these unknown biases. By integrating behavioural finance with artificial intelligence, wealth management firms can assess how clients react to market fluctuations and make data-driven decisions that are less susceptible to emotional or cognitive biases. The report highlights that AI-powered systems can analyse data and detect patterns that may be difficult for humans to recognise, enabling RMs to take proactive measures in advising clients.

According to the report, UHNWIs have increased the number of relationships they have with a wealth management firm from three in 2020 to seven in 2023. This trend signals that the industry is struggling to deliver the expected range and quality of services demanded by this segment. On the contrary, single-family offices, exclusively serving one family, have grown by 200 per cent during the past decade. To further cater to the HNWI and UHNWI segment, wealth management firms must strike the balance between competition and collaboration with family offices. One-in-two (52 per cent) UHNWIs want to set up a family office and want guidance from their primary firm to do so.

With a 40-year track record for innovation and value creation in private markets, Pantheon writes that it invests across the full lifecycle of investments through secondary, direct co-investment and primary fund commitments, with specialist capabilities and expertise spanning private equity, real assets and private credit. Since launching its first listed private markets fund in 1987, Pantheon writes that it has been at the forefront of opening access to private markets to a wider range of investors, and it now offers a range of evergreen solutions with a combined USD7 billion in assets under management.

Providing a complete suite of technology and structuring capabilities, iCapital writes that it will help deliver enhanced access to Pantheon’s evergreen offerings globally, including the firm’s first open-ended, semi-liquid private equity offering available outside of the US, targeting markets with growing demand across Europe, the Middle East, Latin America and Asia.

Victor Mayer, Head of International Private Wealth at Pantheon, says: “iCapital’s global leadership in expanding the alternative investment marketplace makes it an excellent partner to bring our suite of products, providing access to high-quality, hard-to-access assets and fund managers, to a wider range of international investors. We look forward to working with iCapital to continue to bring the power of private markets and our unique expertise to help more people build secure financial futures.”

“We are very pleased to partner with Pantheon and support them in their mission to make their suite of evergreen private markets investment products available to the wealth management channel,” says Marco Bizzozero, Head of International at iCapital. “With wealth managers globally increasingly making private markets a strategic priority as they seek enhanced diversification and superior returns for their clients’ portfolios, iCapital is the trusted technology partner to asset managers expanding their offering to the growing pool of private wealth.”

While inflation has cooled, pricing pressures remain higher in the UK than in many developed market peers. Despite this, monetary easing could be on the horizon as we move through 2024.

As savings rates have moved higher over the past year or so, mass affluent and high-net-worth (HNW) investors have recently been relatively content with allocations to traditional safe instruments – such as deposit accounts, cash ISAs, and short-term government bonds. However, the imminent end of the rate hike cycle could be a catalyst for increased exposure to higher-risk investment solutions – which bodes well for the wealth management sector.

Structural drivers and ongoing innovation

Additionally, the UK wealth space also remains structurally well-positioned. As the majority of the UK’s investable wealth is concentrated among those approaching or already in retirement, the flexibility offered by pensions freedoms has underscored the need for sound investment advice. This continues to accelerate demand for intelligent tech-enabled wealth solutions.

While personal liquid assets total a massive £2trn in the UK, just 30% is currently under the control of independent financial advisors (IFAs) and tied advisers – with a substantial portion remaining trapped in low-yield savings accounts or outdated life and pension products. The opportunity to reallocate these funds to higher-performing wealth management solutions is immense.

Innovative, cost-effective wealth services have also expanded in recent years. However, while robo-adviser platforms such as Nutmeg and Wealthify have gained traction, many individuals still seek a certain level of human advice and reassurance throughout the wealth journey. Given the intricacies of pensions and tax regulations, many experts still require guidance in navigating the complexities.

This has spurred the growth of hybrid advice models, which blend technology-enabled guided advice with human interaction. Additionally, people are increasingly utilising multiple touchpoints in the management of wealth – combining self-service platforms like Interactive Investor and AJ Bell with the expertise of IFAs, financial planners, and discretionary managers.

Small entities ripe for further consolidation

Despite on-going advancements, the sector remains fragmented – housing over 5,000 firms and more than 27,000 advisers. The majority of firms are small, with 90 per cent containing five or fewer advisers. The pressure to consolidate stems from various sources, including an ageing adviser base, retirement planning considerations, heightened regulatory requirements, and general cost inflation.

Private equity investment is driving this consolidation wave, with more than 30 active consolidators in the market. This trend aligns with renewed interest from both domestic and international entities – such as RBC’s acquisition of Brewin Dolphin, the purchase of 7IM by Ontario Teachers’ Pension Plan and Aviva’s deal for Succession. While consolidation is broadly on the rise, the straightforward acquisitions have already occurred, which has driven up pricing and necessitated increasingly nuanced strategies for successful integration. This includes tapping into cost synergies, consolidating platforms, and vertically integrating functions like in-house investment management.

Looking ahead, we anticipate an acceleration of M&A among smaller firms, along with the eventual sale of consolidation entities by sponsor owners once attractive returns are achieved. These entities could merge with other consolidators, be acquired by larger sponsors to sustain the momentum, or become targets for banks and insurance companies. However, not all wealth businesses have the same value creation model – careful presentation of the business and the investment case is increasingly important for unlocking premium valuations.

While the UK has faced a number of significant challenges in recent years, a lowering of rates could provide renewed optimism for the economy as we advance further into 2024. But irrespective of broader macro prospects, we expect the multiple tailwinds powering the dynamic wealth management space to continue apace for the foreseeable future.

The new combined entity will have an AUM of over GBP17 billion and bring together the two groups’ similar client-focused cultures, retaining their complementary investment styles focused on access to global markets and active and direct investment approaches. London & Capital and Waverton have both seen strong growth in recent years and this merger will expand client offerings and international footprints with enhanced investment opportunities, financial planning expertise and broader client propositions.

Lovell Minnick Partners (“LMP”), a US-based private equity firm investing in growth-oriented companies in financial services, and London & Capital’s majority shareholder, will take a majority shareholding in the combined business. LMP will provide growth capital and strategic backing to the combined company, enabling the delivery of enhanced client service, increased investment in technology, and continued product and geographic expansion.

Somers Ltd, the majority shareholder in Waverton since 2013, will continue as a significant shareholder in the new business.

Guy McGlashan, CEO of London & Capital, will be CEO of the combined business.

“We’re genuinely thrilled to announce our merger with Waverton. Our shared commitment to a client-focused approach aligns seamlessly, and we believe this combination will elevate our ability to effectively scale while delivering unparalleled client service, investment opportunities, and wealth solutions,” says McGlashan.

“Providing personalised service and retaining our entrepreneurial spirit has always been paramount, and the cultural fit with Waverton is perfect. This partnership marks a pivotal moment for all of us, promising not just growth but a continuation of the values and service excellence we’re both proud to uphold. Nick and the team have built an exceptional business and I look forward to working with them on this next phase.”

“The merger of Waverton with London & Capital is a hugely exciting stage in Waverton’s evolution for our clients, our staff, and our shareholders,” says Nick Tucker, CEO of Waverton. “Our two businesses share a similar culture of providing outstanding client service combined with a laser like focus on investment performance and we look forward to strengthening our investment capability while enhancing our offerings in the wealth management and advisory services space. This partnership coupled with the support of LMP will accelerate the growth of our combined business for the benefit of all shareholders and I am looking forward to working with Guy to achieve our vision for the merged business.”

“We have a track record of successful partnerships with growing companies run by proven, dynamic management teams,” says Spencer Hoffman, Partner at LMP. “The combined experience and skillsets of these two businesses will provide an enhanced level of service for clients, creating a firm with scale and differentiation to be rivalled in the industry. We look forward to supporting Guy and the talented management teams to expand service offerings, enhance technology capabilities, and shape a prosperous future for our clients, employees, and stakeholders.”

Rothschild & Co advised London & Capital Group, Proskauer advised LMP and Waverton Investment Management Group was advised by Spencer House Partners.

The firm also notes that demand is emerging from private wealth clients as they seek specialised investment knowledge and skill. 

“While the OCIO market experienced a 9 per cent decline in assets under management from the year-end 2021 total, interest in OCIO remains strong thanks to its various benefits to clients—namely the ability to access higher-quality investments than those otherwise available to an asset owner on their own, the lower cost of OCIO compared to an in-house investment team, and the ability to implement changes to the investment portfolio more quickly than an investment committee. Private wealth firms seeking a more institutional-quality experience are showing increased interest and adoption of the model.” 

Cerulli writes that although private wealth is the smallest OCIO client segment, it is projected to grow 16 per cent annually through the end of 2027, the most among all OCIO client types. “Given that the private wealth market is growing faster than the institutional market, the rate of projected OCIO adoption is not a surprise,” says Laura Levesque, director. 

Alternative investment allocations held by many private wealth firms is one of the strongest factors driving demand. “Wealthier clients are consistently seeking institutional-quality investment opportunities as well as the extensive due diligence, special knowledge, and skill that OCIOs offers,” says Levesque. “While differences between a truly institutional client and a private wealth client (e.g., tax profiles) mean some adjustments will need to be made to service these clients, the future growth opportunity is very attractive to many OCIO providers,” she concludes.  

The firm writes that the new functionality is designed to modernise and simplify the model portfolio ecosystem by improving connectivity between tokenised and un-tokenised funds and securities, enabling greater automation. For institutions and distributors, Tokenbridge’s model portfolio token design significantly reduces the volume, complexity and cost of processes through several key features:

Greater connectivity with model portfolio providers: providers of model portfolios are able to issue smart contracts via the blockchain that dynamically manage the rules and characteristics of their models enabling wealth managers and advisers to far better match suitable model portfolios to their clients’ desired investment outcomes.

Greater connectivity between distributors and clients: distributors can execute their chosen model portfolio smart contract, creating a ‘personalised’ token on behalf of clients.

Constant portfolio evaluation: Tokenbridge’s infrastructure allows for the evaluation of the client’s portfolio against the selected model by comparing the issuer’s smart contract with the fund tokens (and untokenised units) in the consumer’s portfolio, so that rebalancing of the underlying (for example, for drift) is instantly reflected in the client’s portfolio.

The firm writes that, for investors, tokenised model portfolio functionality offers greater flexibility to choose or switch model portfolios and paves the way for ‘hyper-personalisation’, ensuring that their portfolios accurately reflect their investment preferences in both the tokenised and TradFi (untokenised underlying funds and securities) ecosystems. This is achieved by automating the acquisition of fund tokens (and untokenised units) to match the composition of their desired, customised model portfolio, the firm says.

Stephen Ashurst, CEO of Tokenbridge, says: “The fund ecosystem is ripe for modernization. Model portfolios are hugely popular and growing fast globally and for good reason as they provide investors with access to sophisticated diversified portfolios underlying constructed by experts. The historic complexity and expense of connecting such a broad ecosystem – from fund managers to model providers to distributors and investors – is vastly simplified with the intelligent use of fund tokens and smart contracts.

“Tokenbridge’s model portfolio infrastructure is designed to facilitate this change – giving broader access and a simpler, more effective and more personalised experience to the next generation of investors. As tokenization gathers pace, for wealth managers and advisers, our technology means that client portfolios can be easily linked to popular retail models and any changes to those models will be instantly reflected in the client’s portfolios. A tokenised funds ecosystem represents a natural next step for the industry, vastly improving current processes, benefiting participants across the ecosystem, and aligning with regulators concerned about access to advice and investor outcomes. Our model portfolio token design ensures that TradFi assets are also connected to the distributed ledger world, offering advisers and their clients the best cost advantages of today with their brand-name favourites”.

This announcement follows Tokenbridge’s full platform launch in late 2023, as well as the addition of several senior advisers to its advisory board.

Based in the United Kingdom, Waverton is an owner-managed investment management firm with offices in London, Edinburgh and Glasgow and GBP9.1 billion (approximately USD11.6 billion) in assets under management, as of 31 December 2022 (source: 2022 Annual Report).

Serving private investors, charities, financial advisers and institutional investors, Waverton’s aim is to generate inflation-beating returns over the long term, using an active and flexible, multi-asset investment approach through bespoke portfolios or specialist funds.

Northern Trust is supporting the trading of equities, derivatives and fixed income assets as Waverton’s sole provider of trading services. The appointment followed a review by Waverton of its operating model intended to help align its operational structure with plans to expand its product range and investment capabilities. It also resulted in two of its traders – Rene Naya and Sam Tresadern – joining Northern Trust.

Michael Allen, chief operating officer at Waverton, says: “Outsourcing our trading to Northern Trust provides Waverton with access to global markets, high-quality liquidity and operational scale, while also allowing us to continue benefiting from Rene and Sam’s valuable institutional knowledge of our business. In addition to both organisations’ strong service ethos and cultural fit, we are confident this combination delivers the service and operational resilience we require to support our growth aspirations.”

Glenn Poulter, global head of brokerage and ITS at Northern Trust, says: “We are excited to be supporting Waverton’s commitment to client service and focus on growth in our role as its outsourced trading provider. To date, our ITS client base has consisted primarily of institutional asset managers and asset owners, but we see increasing interest in this solution from wealth managers as they look to enhance operating capacity and future-proof their operating models. Our appointment by Waverton is testament to this shift and we look forward to working further with managers across this sector globally.”

Northern Trust won Best Outsourced Trading Solution Provider in the 2023 Institutional Asset Manager Service Provider Awards.