Stocks and real estate are facing the end of a nearly 20-year bull run, and many family investors are ill-prepared for the “tough times ahead,” said Candice Beaumont, president of the family office of the Salsano Group. Beaumont, who oversees more than $1.5 billion in Miami assets, said rising interest rates are paving the way for a long-term correction in stocks, office real estate and private equity sectors. “The worst is yet to come,” Beaumont said. “I think this is the beginning of a new paradigm and the beginning of a cycle where we are in a multi-year contraction.” Like many family offices, Beaumont said she keeps “significant” amounts of cash to prepare for possible distressed sales, especially in real estate. She said the Panama-based Salsano Group has recently received calls from US property owners wanting to vacate office or residential buildings at low prices. “A number of large legacy families with trophy assets, especially in New York City, have approached us” to sell, she said. “They want to do it very quickly, but they are not in need yet. But we think this trend will increase in the coming years and there will be a lot more opportunities. We want to have dry powder to be able to execute.” Family offices have , like many large investors, are struggling to navigate the new financial landscape of higher interest rates. Salsano Group, with investments in Latin America, the US and Europe, was founded by Italian-born entrepreneur Sandro Salsano. Beaumont, a veteran of Lazard Freres (M&A) and Argonaut Capital (private equity), said many large investors have continued to invest heavily in real estate and other assets without carefully analyzing risk-adjusted returns in the new interest rate environment. “I see people several[family] real estate for a 4% return, while you can get 4% or more cash, risk-free without any leverage,” she said. “We think the market is a little slow to catch on.” Salsano has a diverse portfolio of cash, government bonds, hedge funds, public stocks and other investments. But its main focus is on private equity, where it has achieved an internal rate of return of 35%, Beaumont said. The group’s biggest project is a new free trade zone in Panama, where the “Panama is a very strategic area that unites the Atlantic and Pacific Oceans, and a logistical hub for the US dollar economy,” she said. “It’s really a nexus of growth.” She said Salsano is looking for bargains in Europe, where the Share prices have fallen to attractive levels for private deals. A $100 million company in Europe and if it were in the United States it would already be valued at $2 billion,” she said. “Sometimes there’s huge arbitrage about where things trade in Europe, especially in some of these small European venues.” Beaumont, who serves on a number of family office boards and advisory boards and was once a world-class tennis pro, said diversification is the number one priority for family offices in the current environment, especially for new tech millionaires and billionaires. “A lot of young families stay in tech wealth,” she said. “They know the tech sector very well, so they focus a lot on one sector. But I think it’s very important to diversify assets. There’s a famous allocation chart that shows which sectors have outperformed each year in the past, and each year it’s a different segment – one year it’s technology, the next year it’s commodities, the next year it’s distressed debt. It’s completely different every year. That’s the best example of why family offices need diversification.”
Head of $1.5 billion family office: ‘The worst is yet to come’