Being a family office, your priority is straightforward; define an asset allocation strategy, then preserve and grow wealth for the high net worth family you represent.
The forex market isn’t just for banks, multinational corporations, and speculators.
This article will explain why your family office shouldn’t overlook the forex market and some of the approaches you can take to seek investment opportunities from the forex market.
Forex is an all-weather Market
According to The Global Family Office Report 2020, published by UBS, family office funds’ are allocated to global equities (29%), fixed income products (17%), private equity (16%), real estate (14%), and cash equivalents (13%).
The remaining 11% consists of allocations to hedge funds, precious metals, and arts & antiques.
Each asset class mentioned above requires holding long-term positions and bullish conditions for capital gains.
Unlike most markets, forex trading strategies do not rely on bullish market conditions for upside.
Instead, adept traders thrive on volatility. No matter what economic situation we face, there will always be a disparity between the value of national currencies, ensuring an almost constant stream of trading opportunities.
According to Amazon’s Form 10-K for the fiscal year ended December 31, 2020, changes in foreign currency exchange rates impacted the company’s net USD sales negatively by $2.6 billion in 2019 and positively by $1.4 billion in 2020.
These figures emphasize how important it is to manage foreign exchange risks and how optimization can lead to profit rather than loss.
How can Family Offices Engage in the Forex market?
Unfortunately, many family offices see the foreign exchange as a risk threatening their ROI rather than an asset class with profit-making opportunities.
Trading forex is a hands-on, fast-paced activity requiring expertise that presumably most lack family offices. Fortunately, there is outside help from various asset managers in the forex space.
In the forex asset management space, tens of thousands of money managers are promising the impossible.
It can be hard to see the genuine artifact against a backdrop of faking or deluded.
For sure, running a consistently profitable trading strategy is challenging but not impossible. At Scandinavian Capital Markets, we proactively seek successful traders.
Our asset managers operate manual swing and position strategies and algorithmic and quantitative systems running scalping and day trading strategies.
As a brokerage firm, we cater to any trading strategy and help clients build the best forex liquidity feeds.
Through our assistance, we have transformed regular clients into profitable asset managers for our investors and partners in several instances.
Why Forex makes Sense for Family Offices
Low execution costs
In 2019, according to the UBS Global Family Office Report 2019, the total average spent on services by European family offices was 121 basis points (bps). The cost comprises 74 bps operational costs and 47 bps external investment management and performance fees.
In contrast, forex brokers like Scandinavian Capital Markets charge just five basis points for order execution.
In 2019, the total annual performance of family offices in Europe was 4.3%, whereas it’s entirely reasonable for a forex money manager to earn, on average, north of 5% per month.
Low allocation requirements
Since most forex trading strategies are inherently more risky than other asset classes, higher returns justify lower allocations. Leverage is another factor reducing the number of funds needed to allocate to a forex strategy to see meaningful returns.
Depending on the applied trading strategy, forex positions are held for a few minutes to a few days. For most trading systems, forex trades are only held for a matter of hours or days. In addition, on most trading platforms we offer, transactions are settled on your account immediately. Therefore, funds allocated to a forex strategy are readily available.
The forex market boasts a wide range of advanced trading platforms offering sophisticated and compliant market analysis, trade management, reporting, and execution functionality.