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Flashcards in CAIA - 06 - Family Offices Deck (64)
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1

There are two types of family offices:

 

1. ___ family office

2. ___-family office

There are two types of family offices:

 

1. Single family office

2. Multi-family office

2

The cost of running a single family office is estimated to be about ___ basis points per year.

The cost of running a single family office is estimated to be about 60 basis points per year.

3

A key benefit to family offices is providing a consolidated ___ ___ and ___ service.

A key benefit to family offices is providing a consolidated wealth management and accounting service.

4

Some goals of family offices are as follows:

 

1. Maintain a ___

2. ___or ___ ___ for future generations

3. Maintain ___goals

Some goals of family offices are as follows:

 

1. Maintain a lifestyle

2. Preserve or grow wealth for future generations

3. Maintain charitable goals

5

Family Offices provide several benefits over private banks and traditional asset managers:

 

1. Central source for ___ ___

2. ___

3. Dedicated ___

4. Consolidated ___

Family Offices provide several benefits over private banks and traditional asset managers:

 

1. Central source for financial management

2. Confidentiality

3. Dedicated Staff

4. Consolidated Capital

6

The SEC currently permits family offices to serve up to ___ generations of family related to a designated ancestor

The SEC currently permits family offices to serve up to 10 generations of family related to a designated ancestor

7

If a family office accepts funds from external clients, it must register with the ___, meet other ___ ___, establish a ___ ___, and set up a ___ ___.

If a family office accepts funds from external clients, it must register with the SEC, meet other regulatory requirements, establish a reporting structure, and set up a compliance department.

8

Family Offices primarily serve ___ generations and ___.

Family Offices primarily serve second generations and beyond.

9

Many first-generation UHNW individuals have ___ wealth positions.

Many first-generation UHNW individuals have concentrated wealth positions.

10

The proceeds of concentrated stock positions may be invested in a ___ ___, which is a set of assets used to fill a gap in the portfolio.

The proceeds of concentrated stock positions may be invested in a completion portfolio, which is a set of assets used to fill a gap in the portfolio.

11

The assets used in a completion portfolio should have ___ correlation with the assets in the concentrated portfolio.

The assets used in a completion portfolio should have low correlation with the assets in the concentrated portfolio.

12

A ___ ___generates significant cash in a short period that sellers then want to invest.

liquidity event generates significant cash in a short period that sellers then want to invest.

13

For concentrated first-generation wealth, many FOs use an ___ return benchmark.

For concentrated first-generation wealth, many FOs use an absolute return benchmark.

14

Allocations to cash, bonds, and absolute return investments are ___ for the endowment portfolio than for the FO portfolio.

Allocations to cash, bonds, and absolute return investments are larger for the endowment portfolio than for the FO portfolio.

15

Allocations to risky assets that generate long-term capital gains are ___ for the FO portfolio than the typical endowment fund.

Allocations to risky assets that generate long-term capital gains are larger for the FO portfolio than the typical endowment fund.

16

The private equity allocation is much ___ for an FO portfolio than the typical endowment.

The private equity allocation is much larger for an FO portfolio than the typical endowment.

17

Liquid assets are assets that can be sold in less than ___ ___ at ___-___prices.

Liquid assets are assets that can be sold in less than three months at non-discounted prices.

18

Illiquid assets are assets that can be sold within ___ ___ at ___ prices.

Illiquid assets are assets that can be sold within one year at discounted prices.

19

Semi-liquid assets are assets that are sold between ___ ___and ___ ___.

Semi-liquid assets are assets that are sold between three months and one year.

20

Due to the high illiquidity of most UHNW portfolios, many have a ___ ___or ___ ___ with an external bank.

Due to the high illiquidity of most UHNW portfolios, many have a credit line or liquidity backstop with an external bank.

21

While endowment investment portfolios are driven by beta drivers, returns on many asset classes and FOs are driven by four key macroeconomic factors:

 

1. ___ ___

2. ___

3. ___

4. ___ ___

While endowment investment portfolios are driven by beta drivers, returns on many asset classes and FOs are driven by four key macroeconomic factors:

 

1. Real return

2. Inflation

3. Growth

4. Risk premium

22

Fixed income securities are driven mostly by ___ ___and ___, while riskier assets are driven more by ___and ___ ___.

Fixed income securities are driven mostly by real return and inflation, while riskier assets are driven more by growth and risk premium.

23

Taxable investors consider an investment's ___ ___by structuring investments to have the lowest possible tax liability.

Taxable investors consider an investment's tax efficiency by structuring investments to have the lowest possible tax liability.

24

Gains from investments held for less than ___ ___ are classified as short-term capital gains.

Gains from investments held for less than one year are classified as short-term capital gains.

25

Short-term capital gains are typically taxed at the investor's ___ ___tax rate, which is ___than the tax rate for qualified dividends.

Short-term capital gains are typically taxed at the investor's ordinary income tax rate, which is higher than the tax rate for qualified dividends.

26

Gains from investments held for more than ___ ___ are classified as long-term capital gains.

Gains from investments held for more than one year are classified as long-term capital gains.

27

Long-term capital gains are taxed at ___ rates than short-term capital gains.

Long-term capital gains are taxed at lower rates than short-term capital gains.

28

The highest long-term capital gains tax rate in the U.S. is ___%.

The highest long-term capital gains tax rate in the U.S. is 20%.

29

Some instruments benefit from special tax treatment. Examples include ___ ___ contracts, which include instruments such as futures contracts.

Some instruments benefit from special tax treatment. Examples include Section 1256 contracts, which include instruments such as futures contracts.

30

For tax purposes, ___% of gains of Section 1256 contracts are considered long-term capital gains and ____% are short-term gains.

For tax purposes, 60% of gains of Section 1256 contracts are considered long-term capital gains and 40% are short-term gains.

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