Introduction
Dear Readers,
We hope you had a good start to the second quarter and a successful Q1 behind you.
April kept us busy in a good way. A large part of our month was spent reviewing advisory clients' existing portfolios, laying the groundwork for personalized wealth concepts (“Vermögenskonzepte”) touching on a variety of topic in regards to (tax) structure, asset allocation, and other areas of improvement. Many portfolios continue to be concentrated in cash and (heavily appreciated) equities, while bonds and commodities still play a minor role - in our view, something with room for optimization, even for return-oriented investors.
Somewhat related to this question of diversification, we were excited to host our second joint event of the year, this time together with New York-based hedge fund manager Magnitude Capital, who included Berlin as part of their German client tour. Over lunch at Château Royal, we made the Case for Hedge Funds - a conversation our clients have been asking for with increasing frequency, particularly given the appeal of uncorrelated returns in the current environment. What was supposed to be a one-hour conversation with room for networking turned into over 2,5 hours of heated discussion.
And of course, the situation in the Middle East was not far from our minds. Markets sold off as the US-Iran conflict escalated, only to stage another rapid recovery, driven more by ceasefire optimism and the unwinding of risk hedges than by any fundamental resolution. As we write this, a fragile ceasefire has just been extended, the Strait of Hormuz remains closed, and talks are at best uncertain. If you missed our piece Keep Calm (And Stay Invested?) from earlier this month, it remains very much worth a read, as does Best Practices in Late-Cycle Investing. Maybe the TACO trade has turned into the NACHO trade - more on that at the end of this newsletter. 😉
All the best,
Jan & the Cape May team
What’s new with Cape May?
This month, we gave Cape May Wealth Weekly a fresh new design. After two years of writing, it felt like the right moment to bring the newsletter's look in line with our broader brand, and to make our website cleaner and easier to navigate. We put real work into it, and we hope you notice the difference. We’d love to hear what you think about it!
As always, if you have feedback or suggestions, feel free to reach out.
How we served our clients this month
As we wrapped up the last of our annual reviews in March and catch-ups from Q1, April still kept us plenty busy. A few highlights:
Reviewed a client's overall asset allocation and identified opportunities to improve their risk-return profile through additions of asset classes such as regional equities, higher- and lower-risk bonds, and commodities, and outlined specific areas of improvement in their existing managed investments
Reviewed Alpha-oriented, actively managed investment opportunities for a prospective client, and assessed how they could be implemented into their diversified portfolio under considerations such as risk-reward and time investment, and outlined alternatives to achieve the same outcome (“Structural Alpha”)
Analyzed a client’s existing investment across venture, private debt, liquid assets, and own companies, laying the groundwork for a comprehensive cashflow overview and the resulting implications to their financial plan over the coming years
Identified tax optimization opportunities for a client across shareholder loans, salary distributions, and other near-term structural quick wins, in order to optimize cashflow available for private lifestyle expenses
Reviewed a venture capital fund opportunity for a client and assessed the fit with their overall allocation and long-term investment goals
Analyzed how to best generate liquidity for two illiquid investments from a diversified liquid portfolio, resulting in the implementation through asset sales and a margin loan
Conducted a scenario analysis of expected cashflows and NAV development for an existing private equity portfolio, modelling how the cashflow profile could evolve under different market conditions over the coming years
Critically reviewed a client’s existing capital markets portfolio and broader wealth picture, outlining areas of improvement such as additional asset classes to improve the risk-return profile, as well as certain structural improvements in context of asset transfer and international mobility
Supported a client on the structuring of their wealth transition from parents to children and the resulting considerations involved in passing wealth to the next generation, touching on topics such as a family holding company (Familiengesellschaft)
Negotiated with a potential buyer of a client’s venture capital investment, touching on matters such as commercial terms, tax consequences, and ‘best practices’ for future investment opportunities
…and many, many more. This month was particularly busy! As always, we pride ourselves on the breadth of topics of what we cover. If any of the above resonates with your own situation, don't hesitate to reach out.
Cape May Wealth Weekly
In Investing for Later-Stage Entrepreneurs, we focused on what entrepreneurs should do after their first significant liquidity event, whether from a secondary or a partial exit, and discussed the common mistakes founders make when money hits the account for the first time.
In Keep Calm (And Stay Invested?), we revisited the classic "stay invested" argument in light of the US-Iran conflict and the market volatility it brought, taking a closer look at the best/worst days argument, the psychology of market entry, and what investors should actually do when headlines are at their most alarming.
In Poor Man’s Private Credit, we gave a little introduction to so-called Business Development Companies (BDCs) – a listed, accessible alternative to traditional private credit that tends to fly under the radar, particularly among European investors.
In The Case for Small Family Offices, we pushed back on the widely-held view that you need at least €250M to justify setting up your own family office, arguing that the structure makes sense at a much lower threshold than most people assume.
And as always, if something's on your mind that we haven't covered yet, we'd love to hear it.
Final Remarks
This wraps up the fourth edition of Cape May Monthly Review. A couple of things before you go:
We continue to see strong interest from clients in (funds of) hedge funds, and following our event this month, have an even clearer picture of what's available and how we're thinking about the space. If you'd like to hear more, reach out and we're happy to share our research and walk you through the opportunities we're looking at. We might also conduct a ‘follow-up’ session to our event to also give a few interested but unfortunately absent investors a chance to learn more.
And if you'd like to join one of our upcoming social events in Berlin, let us know. We keep them small and the conversations tend to be good. The next one shouldn't be too far off.
Thanks for reading and enjoy the long weekends ahead. May has no shortage of Feiertage. And if you were wondering what the NACHO trade is…
Cape May Wealth Advisors is a Berlin-based wealth management firm focused on helping affluent entrepreneurs find financial independence. If you are interested in learning more about how we can help you, reach out to us via email, and make sure to subscribe to our newsletter.