Rethinking Family Wealth in an Age of Permanent Disruption
Inflation has returned, interest rates have normalised after a decade of distortion, geopolitics has fractured into blocs, and capital markets are more concentrated than at any point in recent history. According to a new Lombard Odier study on long-term investment and family wealth, this is not a temporary phase but a lasting inflection point.
These observations demand a fundamental rethink of how wealth is preserved and grown across generations, the authors of a new study published by Swiss private bank Lombard Odier conclude.
The report shows that the efficient frontier for conventional portfolios is drifting downward. With policy rates back near zero in Switzerland and subdued real yields across developed markets, traditional fixed income no longer fulfils its historical role as a reliable engine of real returns.
Even equities, after years of exceptional performance, now face valuation headwinds. In this environment, relying on legacy portfolio structures risks locking families into structurally lower long-term outcomes.
Endowment Model as a Strategic Compass
One of the study’s central conclusions is that large families increasingly resemble institutional investors rather than private individuals. The research highlights university endowment funds as a proven reference point.
Over decades, leading endowments have delivered annualised returns above eight percent by combining public markets with significant allocations to private equity, real assets, and alternative strategies.
Their success stems not only from asset selection but from disciplined diversification, manager selection, and a tolerance for illiquidity that aligns with multi-generational time horizons.
Designing Portfolios Around Purpose, Not Benchmarks
Instead of static models, the report advocates modular portfolio construction built around three functions – income, growth, and diversifiers. This framework allows portfolios to serve multiple objectives simultaneously: funding lifestyle needs, compounding capital, and protecting against systemic shocks.
Crucially, asset allocation is anchored in family goals and governance structures, not short-term market forecasts. The study estimates that a diversified, endowment-inspired portfolio could still generate around seven percent annual returns over the next decade, sufficient to double wealth in real terms over a generation, albeit with greater dispersion of outcomes.
Lessons From a Century of Market History
Drawing on more than 125 years of global return data, the study reinforces several enduring truths. Equities remain the most powerful long-term wealth generator in moderate inflation regimes, delivering real returns of roughly 6 to 8 percent when inflation is contained.
Systematic reinvestment of dividends accounts for a substantial share of total equity returns, particularly in markets such as the United States and Switzerland. By contrast, high inflation consistently erodes both bond and equity performance, underscoring the importance of regime awareness in strategic asset allocation.
From Wealth Accumulation to Wealth Continuity
Ultimately, the report frames investment strategy as part of a broader question: how families sustain cohesion and purpose alongside capital. Long-term success depends not only on returns but on governance, intergenerational engagement, and the alignment of financial capital with values, including sustainability and impact.
In a world defined by constant change, the report’s message is clear: stability is no longer achieved by standing still, but by continuously rethinking how wealth is structured, invested, and passed on.
