FINANCIAL ASSESSMENT OF THE CONSEQUENCES OF ACHIEVING CAPITAL PROTECTION AND SUCCESSION OBJECTIVES IN TRUST MANAGEMENT OF FAMILY AND PERSONAL ASSETS

Abstract

The objectives of trust management of family and personal assets are not limited to capital growth: alongside investment returns, the owner pursues capital protection against risks unrelated to investment activity and succession upon the transfer of capital to the next generation. Existing approaches to performance assessment do not fully capture the achievement of these objectives at the moment of choosing a management configuration: portfolio return metrics do not reflect them, retrospective assessment of actual capital preservation becomes possible only after a long cycle involving generational change, and multi-criteria scoring methods express results in conventional units that cannot be compared with monetary valuation without additional subjective assumptions. This article proposes a mechanism for the financial assessment of the achievement of capital protection and succession effects based on expressing them through expected capital losses measured at the end of the management horizon. The protection effect is defined as the reduction of expected losses from institutional events, and the succession effect as the reduction of expected losses from capital fragmentation upon transfer. Both effects are expressed through their impact on terminal capital, making them comparable with investment performance and the costs of maintaining the structure. The proposed mechanism reproduces the logic of retrospective assessment while being applied in a forward-looking form, that is, prior to the decision on the management configuration. A numerical illustration is provided, demonstrating the calculation logic and the determination of a threshold value for the probability of an above-mentioned risks.