Harry Lewis

Every High Net Individual will obviously have specific circumstances but in general three inter linking themes will be occupying their thoughts in battling through a recession as difficult as this one. “Firstly they will be assessing their capital base. Traditional asset classes such as property and equities have seen very significant markdowns; Privately owned company values are heading in the same direction as the general economy now reaps the whirlwind of the credit crunch and the financial crisis of last autumn. Repayment of historic and expensive debt will be a priority. In looking for safe havens, historically Gold has been hugely defensive in such times and the price has soared in the first quarter this year - a reflection of the dash for security.

“Secondly they will be acutely aware of their income situation. The majority of successful individuals are conservative with the wealth they have created and much of their wealth will be held in cash or near cash investments. Accordingly the very severe drop in returns caused by the sharp decrease in interest rates leaves them with the choice of eroding capital to maintain their income or taking significantly more risk in looking for commensurate return.

“So increasingly we are seeing interest in the commercial property sector; whilst most agree with the consensus that the sector has further to fall in the short term, those same investors take the view that much of the pain is now “in the price” and anyway those deals will be very competitive at the time the market bottoms out. So the theory is to take the long term view for capital values and lock now into yields in excess of 7%. Similarly in equity markets, shares of companies that are traditionally defensive through their essential nature and cash generative qualities - such as the utilities - are popular and seen as relatively risk averse with well covered and strong dividend payments.

“Thirdly - and critically - the high net worth individual will also see the downturn as an opportunity. After 16 years of consecutive growth in the economy, the substantial asset price corrections we are now seeing will - at some point in time - bottom out and the recovery begin. That point will not be lost on the entrepreneur.”

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