Liquidity buckets for a billionaire family office
Built on Chapter 9 of The Single Family Office by Richard C. Wilson. Full chapter text: FamilyOffices.com.
Organize liquidity around the payments the family may need to make. A large balance sheet can still leave the office unable to fund an obligation at the right entity. The investment team needs a cash plan that distinguishes available money from assets expected to become available later.
Chapter 9 emphasizes tailoring investment management to family priorities. Liquidity planning is an application of that principle. I would start with the obligations and only then decide how to group the capital supporting them.
List what has to be funded
Prepare a schedule of known payments and existing investment commitments. Identify which entity owes each amount and who maintains the supporting record. Include obligations that may arise under guarantees or other agreements where relevant.
Separate fixed commitments from discretionary spending. The family may be able to postpone a new project while being unable to defer an existing capital call. Those differences should be visible when the office evaluates available cash.
Give uncertain items an explicit treatment. The team can identify a range or a condition without pretending to know an exact outcome. The family should see which assumptions could materially change the funding requirement.
Distinguish access from reported value
Cash already available differs from an investment that may be redeemable later. Review notice requirements and any restrictions with the responsible professionals. A reporting label should not imply immediate access that the terms do not provide.
Expected property sales and private distributions need separate treatment. Their timing can change. The office should explain what happens if those sources arrive after an obligation falls due.
Keep ownership restrictions attached to the cash. A balance held by one trust or company may be unavailable to another payer. Confirm any permitted transfer and required approval before counting it as a shared reserve.
Give each group of capital a defined purpose
The office can group capital by the timing and certainty of its intended use. Avoid adopting arbitrary labels without an operational meaning. Staff should know which obligations a group supports and what risk is acceptable for that assignment.
Set the detailed investment instructions with qualified investment professionals. Capital needed for near-term obligations requires an assessment of access and potential loss consistent with that use. The appropriate holdings depend on the actual circumstances.
Record who can move capital between groups. A transfer into a long-term investment can quietly consume funds previously expected to support payments. The office needs a deliberate approval process for that change.
Check overlapping calls on the same money
Compare the cash plan with the investment pipeline. Several proposals can each look affordable if considered alone. The team should show their combined effect alongside existing obligations before the committee approves another commitment.
Include expected expenses of owned assets. A property or business may require funding while investment distributions slow. The family should understand where those calls would compete for the same cash.
Have the relevant employees reconcile information. Investment staff, accountants, and operating managers may hold different parts of the schedule. Assign one person to maintain the consolidated view and resolve discrepancies.
Test a delay before it happens
Ask what the office would do if a material expected receipt arrived late. Identify accessible sources and the approvals required to use them. Avoid treating an unapproved borrowing arrangement as cash already available.
Review the consequences of selling assets or drawing permitted facilities with the appropriate professionals. The family needs to understand costs and constraints before relying on those options as part of the plan.
Record the order in which staff should escalate a shortfall. The employee who sees the issue first should know whom to notify and what information to provide. A clear route is useful even when the office has ample resources.
Keep the schedule current
Update the plan when commitments or family spending decisions change. Explain significant differences between expected and actual cash movements. Those differences can reveal assumptions that need adjustment.
Use the schedule in the committee packet before new illiquid investments are approved. The office should be able to identify the funding source and explain what capacity remains after the proposed commitment.
What to take from this
- Match obligations with accessible funding by entity.
- Separate expected receipts from money already available.
- Review combined commitments before approving another one.
This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.
Questions and answers
Is a high asset value the same as liquidity? No. Access depends on the asset terms, ownership, and timing.
Should expected distributions count as certain cash? Describe their uncertainty and test how obligations would be met if they arrive late.