Blu Family Office: Diversifying investment risk, rather than trying to predict the future

Christian Armbruester, Chief Investment Officer of Blu Family Office explains why his firm eschews traditional strategic asset allocation approaches, focusing instead on diversifying across four key types of investment risk.

What is Blu Family Office’s history, and how does it stand now in terms of its UK presence and client base?

Blu Family Office was founded in 2010 to manage the assets and affairs of a single family and has since expanded its mandate to help others to invest, grow, protect and pass on wealth to the next generation. Today, Blu is a multi-family office, with expertise in investment and wealth management, operating out of the UK, Germany and Holland. Our UK office is based in Richmond, London, and our client base is comprised of both families and high net worth individuals across the UK and Europe. We offer our clients investment and bespoke advisory (wealth management) solutions.

Who is the ‘typical’ client of Blu Family Office in the UK? What is their stage of life and what are they trying to achieve with their wealth?

A typical client will either invest directly into our investment strategies and products, or benefit from our bespoke advisory services.

We do not pigeon-hole clients according to their account size: we provide all clients the same access and exposure to our investments strategies, which many would not be able to get anywhere else. Our investment strategies only require a minimum account size of £75,000.

Our advisory clients are typically larger and have many complex needs that require a full suite of investment, wealth management and advisory services – this requires a higher minimum account size of £2m due to the cost of implementing certain structures. Given that we are a family office, our clients and their family members are in many different stages of their lives. Therefore, we aim to assist our clients with finding solutions that fit their current and future needs in terms of the investment risk and the costs of implementing the desired strategy as optimally as possible.

How would you describe Blu Family Office’s investment ethos and risk management approach? Does the firm have expertise in any particular areas of investment?

We do not invest according to the traditional strategic asset allocation model; our goal is to invest across assets that behave differently so as to truly diversify our risk exposure.

We have analysed the underlying drivers of risk using quantitative and qualitative analysis, and have based our diversification model on four core types of risk – irrespective of asset class or investment product. These are credit, correlation, market and idiosyncratic.

By following our model of risk diversification, we can navigate the entire investment spectrum very precisely to meet the bespoke requirements of our clients. The key to our success is to make sure that the risks we are exposed to are truly distinct from one another to limit our downside. This enables us to harvest risk premiums that arise from growth, liquidity and market movements. We also aim to minimise the costs of implementing the investment strategy and ensure a strong alignment of interests by investing alongside our clients. We have first-hand, multi-generational experience of managing our own investments. Additionally, the principals have many years of collective experience in investing, trading, fund management and strategic advisory from their tenures in the financial services industry.

How does Blu Family Office go about devising investment strategies and building portfolios which suit each individual client’s risk-profile and financial goals?

Everything starts with a thorough assessment of our clients’ unique situation, needs and financial goals. We place a lot of emphasis on making sure that any investment strategy foremost covers the short and long-term liabilities, as only then can you take further financial risks to grow the assets. From there, we try to get an understanding of the client’s risk tolerance, expectations and desires to build the appropriate investment strategy. Our approach is actually quite simple in that we don’t take views or make return promises as we think the future – and therefore also the development of future asset prices – is impossible to call. Rather, we make sure that we get rewarded efficiently for the risk we take, and that includes making sure that the costs and fees don’t adversely affect the performance too much. As people’s lives often change, we ensure regular contact with clients to allow us to monitor any significant changes that might result in a change in their preference to taking risk and call for a portfolio rebalancing. At a strategy and portfolio level, all clients receive regular, monthly updates on their investments. Quarterly, we provide a more in-depth report of performance over the last quarter.

Many of our clients are looking for financial planning as well as investment advice. How do you help in this area?

Having just a good investment strategy is not enough to ensure one’s wealth is managed efficiently and effectively. Taxes, costs and fees matter, particularly as regards succession planning. We don’t subscribe to complex schemes to avoid paying taxes as the risks of changes in the tax law can have retroactive repercussions if one tries to be too clever (and as we have seen in recent high-profile cases). We do however believe very strongly in tax deferment vehicles. Using the experience in the management of our families’ wealth, we are able to provide guidance, perspective and practical solutions with regards to financial planning and access to our tried and trusted network of specialised service providers who can help implement the chosen strategy. It is also very important to bear in mind the cost of setting up and running particular schemes or strategies and which is why we only offer these services to our larger clients that have a minimum account size of £2m.

How would you describe Blu Family Office’s approach to servicing and communicating with clients?

The short answer is: we service each client in how they want to be serviced. Some of our clients have a very hands-off approach, which means that beyond the initial strategy inception and regular reporting, they don’t want us to bother them. Whereas, other clients like to meet on a regular basis and be kept updated on their portfolio and new strategies. Beyond regular meetings with the principals or the relationship manager, we offer monthly seminars and webinars, and we send out interesting articles or thoughts on relevant financial or geopolitical topics. Everything we do is meant to make our clients feel that they are part of ‘the family’ and as we are invested in the same products and services as our clients, it is easy to find common ground.

How does Blu Family Office help clients engage more effectively with the management of their wealth?

From the outset, we make sure that every client understands the risks of their chosen investment strategy; we also make sure that we manage expectations, which is why we place such a great deal of emphasis on education.

We offer individual workshops – including for other family members and the next generation – along with the aforementioned seminars in which we explore typical and topical aspects of wealth management. We love to discuss investment-related subjects and of course encourage investment education and research – whether it is through our seminars, insights or standing around the Bloomberg terminal and discussing the markets. We also encourage our clients to send us articles or questions on topics they have come across, and we absolutely want our clients to feel that by being with Blu Family Office they are able to relax and not stress out about managing their wealth.

What else is distinctive about Blu Family Office?

I think the most distinctive aspect of our approach is that we do not adhere to the same model and fallacy that everyone else seems to be relying on in trying to predict the future. We focus on understanding the underlying risks of each of our investments and we make sure we keep the costs and fees to implement our strategies as low as possible.

We are transparent, we are open to new ideas, we are constantly looking for ways to improve our service offering and most of all we manage our clients’ money exactly the same as our own.

All clients have direct access to the principals and their expertise and can benefit from institutional-quality investments and services with a family office ethos. We welcome like-minded families and individuals as we believe we can achieve greater things by operating together. If you would like to start a conversation with Blu Family Office, please get in touch with the findaWEALTHMANAGER.com team HERE.