19 FINANCEOUTLOOKINDIANOVEMBER, 2025decisions. It ensures that portfolios remain resilient while balancing growth, liquidity, and preservation and help in wealth creation across economic cycles and generations.In essence, asset allocation for UHNW families is goal-based, dynamic, and deeply contextual--balancing near-term liquidity with long-term compounding and inter-generational continuity.How do MFOs implement risk-adjusted return frameworks, and what financial models are typically used for performance measurement?MFOs generally evaluate performance through a portfolio-level lens rather than asset by asset. The focus is on how the entire portfolio performs relative to the overall weighted risks undertaken compared to its chosen benchmarks. Performance measurement is largely benchmark-based, where portfolios are compared to appropriate indices or peer sets. It is important to separate manager skill from market exposure by using factor and style attribution across beta, size, value, quality, and momentum. An evaluation tool like attribution analysis is used to identify sources of excess returns from a firm or fund manager's active investment decisions. For private markets, it is imperative to evaluate results using IRR, DPI, and TVPI together with Public Market Equivalents or available benchmarks. MFOs blend quantitative and judgment-based evaluation to ensure consistent, risk-conscious performance across asset classes and market cycles.How is financial leverage used within MFO investment strategies to enhance portfolio returns without increasing undue risk?In India, leverage is used selectively by MFOs and primarily in situations where the risk-return spread is clear and predictable. While leverage can enhance returns, it inherently adds risk, and families tend to be cautious about using it. In global markets, lenders such as private banks often extend low-cost credit to family offices to invest in yield-bearing assets, creating positive spread opportunities.However, in India, the cost of borrowing is typically high, often reducing the effectiveness of such strategies. Therefore, MFOs in India tend to use leverage primarily for structured investments or strategic equity stakes, where asset performance is relatively predictable, real estate or long-term strategic acquisitions, where credit is secured against the asset itself, ring-fencing family liquidity, and tactical opportunities in fixed income, where temporary arbitrage between debt cost and return justifies leverage.Conversely, using leverage for public market equity exposure remains limited among Indian UHNW families due to higher risk of volatility in share price. Most family offices prefer discipline and long-term compounding over leveraged alpha generation.In short, in our experience, leverage is viewed not as a tool for speculative gain but as a strategic instrument, deployed only when risk-adjusted
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