Our annual Global Family Office Report is the most comprehensive study of single family offices globally. In its latest edition it focuses on 191 of the world’s largest family offices and covers a total net worth of USD 225.7bn, with the individual families’ net worth averaging USD 1.2bn.
Adapting to an altered world
Continued low interest rates have shaken family offices’ (FOs’) long-standing faith in fixed income. Looking forward five years, they plan to dial down strategic asset allocation to low yielding bonds and cash. About a third (35%) intend to raise equity allocations in developed markets, more than half (56%) will do so in developing markets and almost half (42%) in private equity direct investments.
Percentage of family offices planning to change asset allocation in the next 5 years
Net (increase – decrease)
Cool heads rule
Despite economic turbulence and strains in international relations, family offices retain a risk-on frame of mind. There are no overriding concerns when it comes to geopolitics, COVID-19’s impact on the economy, rising inflation, low interest rates or high public debt. The chief concern is high valuations across asset classes, with a quarter of FOs globally naming this as their top concern, and a higher 47% doing so in the US.
Key concern of family offices in the next 2–3 years
Seeking returns in digital themes and Asia
Family offices are pivoting to themes that will dominate the economy in the 2020s – including healthcare technology, digital transformation, automation and robotics, smart mobility, and green tech. It also means moving allocations to Asia’s vibrant economies, especially Greater China where 63% of respondents plan to increase allocations over five years. FOs from Western Europe, very much an ‘old economy’, stand out as cutting back at home and tilting to Asia.
Areas of investment for the family office in the next 2–3 years
Private equity preferred
Private equity offers opportunities not accessible in public markets, according to half (52%) of FOs. Forty-seven percent of FOs use both funds and direct investments, while 30% opt for direct investments only. Access and better knowledge of the underlying market are the main reason for considering an intermediary.
Type of Private Equity Investment
Embracing sustainable investing
Sustainable investing is firmly entrenched in portfolios, as more than half (56%) globally have allocations, with family offices in Western Europe and Asia leading the way. Looking forward five years, FOs may use their flexibility to lead the way on adopting ESG integration, planning to increase the allocation to about a quarter (24%) of the overall portfolio.
Average percentage of portfolio allocated to Sustainable Investments in 5 years
Cost pressure ahead
Costs are rising, chiefly due to more spending on wages and IT. More than a third (39%) of FOs report significant or moderate upwards pressure on salaries, and a similar percentage (35%) do for IT. The only area where costs are falling is office space, where 22% of FOs are budgeting for a fall.
Percentage of family offices expecting budget changes in 2021/2022
Net (increase – decrease)
The price and value of investments and income derived from them can go down as well as up. You may not get back the amount originally invested.