UBS presents this year’s Global Family Office Report, as they once again share insights from their family office clients around the globe. This is the third year of compiling the report entirely in-house. Their unique client base, provides the world’s largest and most comprehensive study of single family offices. This year, they have increased their survey size to 221 single family offices that collectively oversee wealth of USD 493 billion and have average assets under management of USD 2.2 billion. They are observing a period of substantial transformation in many areas. The COVID-19 pandemic, digital disruption and geopolitical developments are all driving profound change for global businesses and financial markets. In response to these risks and uncertainties, family offices are reviewing their options with greater urgency. A strategic shift first observed last year is gaining pace. Amid continued inflationary pressure and low expected returns, family offices are seeking both additional sources of return and alternative diversifiers.
Private equity stands out as an asset class with high expected returns and is the only asset class which has attracted higher allocations year after year. Family offices invest directly where they have an edge, often as an extension of the beneficial owner’s business interests. Funds are typically used as a way of complementing these direct investments by spreading risk. However, direct investments are gaining traction, albeit from a lower base. Alongside these established trends, there are some new developments.
In an environment where macroeconomic forces such as loose central bank policies and liquidity will likely imply lower nominal returns, family offices are increasingly seeking out additional returns with active fund managers. The growth of sustainable investing is on pause as family offices become more selective and increase their due diligence in order to identify greenwashing and measure their impact. Family offices are also turning their attention to digital assets, with a preference for distributed ledger technologies over cryptocurrencies. Yet these are early days for this type of investment, and we should not confuse curiosity with commitment. Against a volatile backdrop, family offices also expect their costs to rise over the next few years. For the larger offices, however, there are economies of scale.