During a recession, it's easy to spot the difference between the old-money approach to looking after wealth and the riskier attitude of self-made entrepreneurs

IT IS no surprise so many of Ireland's rich lost their shirts as the boom went to bust, unaccustomed as the nation is to being wealthy. Unlike other western countries that have family fortunes stretching back generations, there is little "old money" in Ireland, with most of it - the Smurfits, the Dunnes, the O'Reillys, the Quinns, the Doyles - going back only one generation.

Rory Quinlan, head of HSBC Private Bank's Dublin operation, says "old money" accounts for only 1 to 2 per cent of the wealth in Ireland - far less compared to other countries.

Given that those with inter-generational wealth have a much different perspective on managing their money, it may explain the dramatic change in fortunes suffered by the self-made wealthy over the past two years.

According to the most recent Forbesrich list of billionaires, Sean Quinn and his family have seen a spectacular $4.5 billion (€2.98 billion) wiped off their wealth, while Tony O'Reilly dropped off the list entirely after a collapse in share price for Independent News & Media.

John Dorrance, on the other hand, heir of the Campbell Soup fortune, saw his fortune decline by "just" $0.4 billion, according to Forbes. Hilary Weston's fortune increased by £1 billion in 2009, according to the Sunday Times Rich List. Hilary is the wife of Galen Weston, chairman and president of food and retail empire George Weston Ltd, founded by Galen's grandfather in 1882.

According to Shane Gill, associate director of Key Capital Private, the distinction is less "old versus new" and more about being aware of the potential risks.

There may be distinctions between old, inherited wealth, second-generation fortunes and the "nouveau riche" entrepreneurs and property developers of the Celtic Tiger boom years, but many share a similar approach to wealth. It is this attitude to wealth generation and preservation that distinguishes them, rather than how old the family's money is.

"The biggest difference," says Gill, "is that the people who have come out of this in good shape understood the risks they were getting involved in."

"People didn't accept the risks that were there and didn't understand the value of liquidity. Smarter investors, on the other hand, who weren't so highly leveraged, were able to absorb the correction."

Warren Buffet's approach to investment, of holding on for the long-term and saying no to leverage, is similar to the "old money" approach. Those with inherited wealth tend to have a lower capacity for taking on debt and a different approach to leverage than those with newer wealth.

According to Gill, those with older money tend to treat investments in property more like allocations to bonds. Unlike the newer rich, who sometimes used debt of up to 80 per cent to finance acquisitions, the old rich have a preference for buying property unleveraged [ without loans], renting it and getting a yield. This makes them better placed to absorb a shock in the markets.

"When you add leverage to an asset class you completely change its risk profile. A small correction in asset price and the equity is completely wiped out," says Gill. Moreover, the old rich is far less happy taking on lots of risk. "It's more about preservation, maintaining family assets. The investment approach is far less agressive," says Quinlan.

Perhaps it can be summed up by John Gallagher, of Doyle Group fame, who famously said back in 2007 that he was not investing in Irish property because there is "certainly no up side". While not strictly "old money", his description of the Doyle group as being "sensible people" who would wait for the "froth to come out of the market" ties in with the older-money approach.

As Quinlan points out, the old rich are also more inclined to manage wealth in a professional manner by setting up a family office to take care of their wealth.

One of the few truly "old money" Irish families, the Guinnesses, established one of the world's first family offices back in 1886. Set up to protect the fortune, which came from the flotation of the family brewing business, it evolved into Iveagh Trustees.

In 2007, Rory Guinness, the great-great-grandson of the Earl of Iveagh, led a move which saw €450 million of the family's assets transferred to a specialist fund-of-hedge funds manager, Arundel Partners. Today, the new firm is known as Iveagh Private Investment House and, as well as managing some of the Guinness fortune, it also manages money on behalf of third parties.

For Guinness, the main priorities are "capital preservation, followed by trying to capture a lot of the upside in the markets". However he disputes the reluctance of "older" money to take on debt.

"It's probably true as a generalisation, but there is a time for leverage and it's probably at a time when no one else is using it," he says.

Iveagh's Wealth Fund's "over-riding objective is to manage risk in such a way that the wealth remains intact to be passed from one generation to the next". The fund lost just 2.1 per cent of its value in 2008, a time when markets around the world were in freefall.

Getting the right advice is also crucial.

"One of the tricks is to align yourself with a manager who is as good at dealing with bonds and fixed income as commodities and equities. Guys that were great at running hedge funds in the past decade have been caught short in the past year or so," says Guinness.

However, during the boom many of the newly minted simply chased the next big thing, aided and abetted by product providers masquerading as wealth managers.

Rather than take the time to carefully put a portfolio together with a specific adviser, many went down the multi-broker route, not paying due caution to words like "asset allocation" and "diversification" and instead throwing money into commercial property deals, going overweight in Irish shares. Sean Quinn's 25 per cent stake in Anglo Irish Bank comes to mind.

"They were either led by greed or convinced by a good product provider," says Gill.

When the boom went bust therefore, they were hit much harder than those whose portfolios were focused on preserving capital. "They were so busy accumulating they didn't have time to consider. There is far more control and structure with older wealth. There is time for pause and reflection," says Quinlan.

Older wealth, even second-generation wealth, also tends to be more publicity shy. Not for them exposés in the New York Timesto disclose their perilous financial situations. And, unlike many of Ireland's "nouveau riche", older weath has been through many recessions before and come out the other side. "They can ride through the cycle as they have done so before," says Gill.

It is this experience of preserving money through four or five generations that Guinness hopes will attract investors into his firm's fund. With a minimum investment level of €50,000, the fund is "targeting anyone who has an interest in conservative wealth preservation and wants some upside", says Guinness, adding that he has plans to launch the fund in Ireland in the near future.

Older wealth also tends to be tied up in family businesses and can be quite illiquid. This means that unless they're willing to borrow on the back of such assets - and in general they are not - the cash flow needed to invest in new areas may not be forthcoming.

And, as prices come close to a floor and opportunities abound for those with the cash - and the guts - anyone who kept their cool during the boom is now in a great position to pick up quality assets at distressed prices.

"The irony is that for those who had that focus, the greatest opportunities in the last generation have happened in the last six months," says Gill.

But despite the massive losses sustained by many of Ireland's newer wealthy, the fat lady is not yet ready to sing. According to Quinlan, the massive wealth that was generated over the past decade "hasn't evaporated overnight" and, while those who over-leveraged during the boom are facing challenging times, he is starting to see a lot more activity as investors look for a better return than cash.

The Shrewsbury Set

If an address in Ireland symbolises the wealth generated by the Celtic Tiger 'arrivistes', it's Shrewsbury Road in Dublin's leafy Ballsbridge. While the road was traditionally home to some of Ireland's better known families, the boom ushered in an era of "new money", when some of the most high profile property developers and entrepreneurs looked to call the road home

SEAN DUNNE
Property developer

Dunne and his wife, former journalist Gayle Killelea, were once seen as glittering emblems of the Celtic Tiger property boom. A close friend of former taoiseach Bertie Ahern, Dunne attended Ahern's historic speeches before the US Congress and the UK Parliament, while the pair hired the Onassis yacht, Christina, to celebrate their marriage by cruising their wedding guests around the Mediterranean.

But, the "Dunner's" inexorable rise has faltered in line with the downturn. Where once everything he touched may have turned to gold, earlier this year he went so far as to tell the New York Timesthat he might be insolvent.

Having purchased the site of the former Jurys and Berkeley Court hotels for a record €450 million, his plans to build a 37-storey tower faltered when his planning application was turned down, while the site has since been estimated to be worth less than €100 million. To get some cash flow going, he even opened a supermarket, D4 Stores, on the grounds of the former Jury's Hotel.

He suffered another blow last month when his revised proposals for the Ballsbridge site were turned down again by local councillors.

BRIAN and MARY O'DONNELL
Property investors

While the O'Donnells may be more "low profile" then their fellow property developer residents, they have successfully built up a valuable property portfolio. A former managing partner of William Fry, Brian left the firm in 1999 to set up his own corporate law firm, Brian O'Donnell & Partners, which has acted in numerous deals, including the €380 million sale of the Mater Private to CapVest, a venture capital fund.

Through their investment vehicle, Vico Capital, which was established in 2005, the duo has amassed a considerable property portfolio, becoming one of the biggest names in UK commerical property, particularly in the City of London.

DEREK QUINLAN
Property investor/wealth manager

Currently "in exile" from Shrewsbury Road, Quinlan, a former tax inspector, has moved to Switzerland along with his family, having left the firm he set up in 1989, Quinlan Private, over the summer. Quinlan built up a property empire spanning the globe on behalf of his firm's private clients, and came to international prominence when he led a group of Irish investors to buy the luxury Savoy hotel group in London for €1.1 billion in 2004. His departure came amidst cash calls to investors and the renegotiation of various loan agreements with the banks, as the downturn led to falling values across the property markets.

NIALL O'FARRELL
Entrepreneur

O'Farrell, of Blacktie and Dragon's Den fame, currently has his home, Thorndene, on the market for €14 million. But don't think he's ready to leave the cachet of Shrewsbury Road behind him just yet. He's planning to build a new home on another site he owns on the road. However, he is embroiled in a row with fellow resident David McCann, chairman of Fyffes, over his plans for the new house. McCann, in an appeal to An Bord Pleanala, claims that O'Farrell's plans do not suit the tone of the street, as "Shrewsbury Road is distinguished by an emphasis on secluded maturity", and not a place for "ostentatious braggadocio". Meanwhile, O'Farrell's house has been on the market since the summer, and on the business side, the economic downturn has also hit O'Farrell's chain of menswear stores, Blacktie, which he had to restructure over the summer, halving its workforce.

PADDY KELLY
Property developer

Kelly is another committed Shrewsbury Road resident. He had to sell his original home, Clancool, to make up for money he lost on Lloyds of London in the 1990s, and now lives in house that he built in the garden of his former home. Having lost one fortune, Kelly is struggling to hold onto his current wealth, telling the Commercial Court last March that he was on the brink of bankruptcy.

PAUL COULSON
Financier

Head of the Yeoman Capital group, which controls manufacturer Ardagh Glass, Coulson pulled off one of the most lucrative deals of the boom years when he sold the Irish Glass Bottle site in Ringsend for more than €412 million to a consortium including Bernard McNamara, his fellow Shrewsbury Road resident Derek Quinlan, and the Dublin Docklands Deveopment Authority. Coulson overcame previous difficulties in his career, including the poorly timed acquisition of British company CLF, to transact, from his perspective, one of the better timed deals of the Celtic Tiger. The site is now estimated to be worth just €60 million.