7/23/2024
Five Ways Heirs Can Prepare to Inherit
Over the next few decades, an estimated $30 trillion in assets will pass to heirs. This wealth transfer provides opportunities and challenges for those who will inherit this wealth.
Financial independence is paramount to understanding the implications of wealth transfer and adequately preparing for it. Here, we explore five key actions heirs must focus on as they prepare to inherit.
Open Communication
Engaging in open and honest conversations about wealth transfer with the generation passing on the wealth is essential. Although discussing inheritance matters can be uncomfortable, it ensures all parties are on the same page and enables the younger generation to appreciate the responsibilities involved. Understanding what to expect can significantly manage anxieties and misconceptions, aiding smoother transitions.
Financial Literacy
One critical area of emphasis is financial literacy. As future beneficiaries, understanding the obligations of inheriting vast sums of money or assets and understanding the complexities of estate planning, tax laws, investment strategies, and wealth management is vital. Enhancing one’s financial literacy helps prepare oneself to manage inherited wealth with tools to grow and preserve inherited assets.
Engaging Professionals
One of the most critical steps in preparing to inherit is establishing a relationship with financial professionals currently working with the older generation. These professionals understand your family's financial history and goals, and their guidance can be invaluable during the transition period. Even if you decide not to continue working with them after the transfer, their insights can still be beneficial.
Investing Knowledge
Knowledge of investing is another crucial aspect of managing inherited wealth. Those anticipating inheriting should take the time to learn different investment strategies and understand that the risk tolerance of previous generations might not align with the current one. Hence, understanding risk management and diversification is key to preserving and growing one's inheritance.
Using New Wealth For Good
Heirs must recognize the transformative power of inheritance and use their wealth to reflect their values and contribute to causes they are passionate about. Inheriting is a unique chance to make a significant difference through philanthropy.
Let's Team Up
In conclusion, heirs must be prepared and informed about the many facets of inheriting. Focusing on financial literacy, open communication, strategic investing, and philanthropy can equip heirs to steer wealth transfer effectively while building individual financial stability and contributing to making tomorrow better.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
ART Tracking #: 600102-03-01
the markets-
returns through 7/22/2024
Opportunities in secondaries, which can provide existing limited partners with liquidity and prospective buyers the chance to invest in seasoned assets at a discount, look increasingly attractive.
Like 2022, 2023 was a stagnant year for private equity (PE). Against a backdrop of higher interest rates and economic uncertainty, PE exit activity slowed as buyers and sellers struggled to find common ground on valuations. However, recent data suggest that the worst of the exit activity slump may be behind us.
According to data and estimates from PitchBook, the dollar value of U.S. PE exits rose roughly 15% y/y in 1H24. This is, in part, due to a rebound in IPO exits, which likely owes to a buoyant public equity market and improved clarity on the outlook for interest rates and the economy. That said, the asset class is not out of the woods quite yet. Exits remain far below 2021 levels as public listings remain notably subdued. Corporate and sponsor acquisitions have also fallen, but to a lesser extent, and corporate acquisitions now make up a larger share of exits than normal. Moreover, the number of deals in 1H24, including estimates, rose just 1.3% y/y, while the ratio of PE exits to investments fell to 0.36x in 2Q24 as managers remain focused on putting a near record $3.9tn of dry powder to work.
For public markets, even small improvements in PE exit activity should benefit financials by way of more robust capital market activity. This is already playing out in the 2Q earnings season, with many large banks beating earnings expectations thanks to surging investment banking revenues. However, with interest rates likely to fall slowly rather than drop precipitously, exit activity may take longer to return to normal. As such, opportunities in secondaries, which can provide existing limited partners with liquidity and prospective buyers the chance to invest in seasoned assets at a discount, look increasingly attractive.
Chart of the Week: PitchBook, J.P. Morgan Asset Management. Data are sourced from PitchBook's “Q2 2024 U.S. PE Breakdown" and are as of 6/30/2024. Public listings include IPOs and reverse mergers. *1H24 data includes PitchBook estimates for late reporting deals.
Thought of the Week: PitchBook, Preqin, J.P. Morgan Asset Management.
Abbreviations: Cons. Sent.: University of Michigan Consumer Sentiment Index; CPI: Consumer Price Index; EIA: Energy Information Agency; FHFA HPI: - Federal Housing Finance Authority House Price Index; FOMC: Federal Open Market Committee; GDP: gross domestic product; HPI: Home Price Index; HMI: Housing Market Index; ISM Mfg.
Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally
Adjusted Annual Rate Equity Price Levels and Returns:
Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally
Adjusted Annual Rate Equity Price Levels and Returns:
All returns represent total return for stated period. Index: S&P 500; provided by: Standard & Poor’s. Index: Dow Jones Industrial 30 (The Dow Jones is a price-weighted index composing of 30 widely-traded blue chip stocks.) ; provided by: S&P Dow Jones Indices LLC. Index: Russell 2000; provided by: Russell Investments. Index: Russell 1000 Growth; provided by: Russell Investments. Index: Russell 1000 Value; provided by: Russell Investments. Index: MSCI – EAFE; provided by: MSCI – gross official pricing. Index: MSCI – EM; provided by: MSCI – gross official pricing. Index: Nasdaq Composite; provided by: NASDAQ OMX Group.
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital. Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
Currency: Dollar per Pound, FactSet; Dollar per Euro, FactSet; Yen per Dollar, FactSet.
S&P Index Characteristics: Dividend yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the "Next 12 Months" (NTM) period. Market cap is a bottom-up weighted average based on share information from Compustat and price information from FactSet's Pricing database as provided by Standard & Poor's.
MSCI Index Characteristics: Dividend yield provided by FactSet Pricing database. Fwd. P/E is a bottom-up weighted harmonic average for the "Next 12 Months" (NTM) period. Market cap is a bottom up weighted average based on share information from MSCI and Price
information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index,
information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index,
Russell 1000 Growth Index, and Russell 2000 Index Characteristics: Trailing P/E is provided directly by Russell. Fwd. P/E is a bottom-up weighted harmonic average using First Call Mean estimates for the "Next 12 Months" (NTM) period. Market cap is a bottom-up weighted average based on share information from Compustat and price information from FactSet's Pricing database as provided by Russell.
Sector Returns: Sectors are based on the GICS methodology. Return data are calculated by FactSet using constituents and weights as provided by Standard & Poor’s. Returns are cumulative total return for stated period, including reinvestment of dividends.
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used fromL to R,
top to bottomare: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stockmarket, and
is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures
the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth values).
Past performance does not guarantee future results.
Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial
instrument. The views and strategies described may not be appropriate for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.
instrument. The views and strategies described may not be appropriate for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions.
The J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any
jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
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ART Tracking #: 605559-1
