June 10, 2024
Unpacked: 2024 UBS Global Family Office Report
Dear Reader,
The world’s wealthiest families have laid it all bare.
They’re worried about wars (both military and economic), real estate crashes, and, of course, what might happen to stocks over the coming few years.
What are they doing about it?
Lots.
They’re shifting where they invest, and changing how they choose to manage those investments.
How do we know this?
Because the UBS Global Family Office Report 2024 reveals several key trends and insights from 320 family offices worldwide.
A family office, if you didn’t already know, is a privately held company that handles wealth and investments for a wealthy family.
These private companies generally have one goal — to effectively grow and transfer wealth across generations.
320 family offices w/$2.6B average net worth
According to UBS:
‘The latest Global Family Office Report is the largest to date bringing together the insights of 320 single family offices across seven regions of the world. Representing families with an average net worth of USD 2.6 billion and covering over USD 600 billion of wealth, it confirms the report as the most authoritative analysis of this influential group of investors.’
I don’t know about you, but I don’t know that many billionaire families.
So, let’s take a look at what this most authoritative report reveals about what the world’s wealthiest family offices are doing with their money, and why.
What do they want right now?
The family offices surveryed have been rebalancing their portfolios, increasing allocations to developed market fixed income, and reducing real estate investments.
What’s driving this? Higher bond yields and the desire for greater portfolio stability.
This means that family offices are seeking more stable and predictable returns in response to current economic conditions.
The higher bond yields offer attractive returns, leading to a preference for fixed income over the potentially more volatile real estate sector. This strategic move aims to mitigate risks and enhance portfolio resilience.
In brief: Moving away from risk and toward resilience.
What is keeping them up at night?
The family offices report a long list of concerns. Chief among them? War.
Geopolitical conflicts dominate these families’ worries, both over the next 12 months and the next five years.
Also weighing on their minds: Inflation, interest rates, a real estate correction, global recession, and climate change.
Check out the chart:
What the smart money’s worried about
Source
The takeaway here is that family offices are highly sensitive to global political and economic instability.
They anticipate continued geopolitical tension, environmental challenges, and financial volatility.
These concerns are shaping their investment and wealth management decisions.
In brief: Conflict #1 concern over both next one year, and five years.
Where are they investing?
According to the report, these families ‘appear to be strong believers in American exceptionalism, as US tech companies lead the generative AI revolution and occupy a growing share of global equity markets‘.
North America and Asia-Pacific (excluding Greater China) are the top regions for future investments.
UBS expects family offices to increase allocations to these areas due to attractive investment opportunities and growth prospects.
‘This is an absolute return game‘
Source
This suggests that family offices see significant growth potential in North America and the Asia-Pacific region. The focus on these regions highlights confidence in their economic stability and innovative sectors, positioning these areas as favorable destinations for capital investment over the coming years.
Part of the reason for this, is the artificial intelligence trend.
In brief: US markets still the #1 investing destination.
What are they investing in, and how?
There is a renewed focus on active management as a strategy for diversification and enhanced returns.
Additionally, the report identifies generative AI as a significant investment theme (no surprises there, right?).
Many family offices plan to invest in this technology in the near future.
AI investments most attractive
Source
As you can see, tech features strongly in the top nine investing themes among the family offices surveyed in the report.
Family offices are shifting towards more hands-on investment strategies to capitalize on market inefficiencies and emerging trends.
The interest in generative AI reflects a broader trend of embracing cutting-edge technologies that promise transformative impacts across various industries, signaling a forward-looking approach to asset management.
In brief: Disruptive tech the clear leading investing theme.
Where do they stand on sustainability?
Sustainability is becoming increasingly important for family offices.
They’re integrating ESG considerations into their investment strategies and businesses.
Healthcare and climate change are top sustainability themes, reflecting a broader commitment to positive environmental and social impacts.
But, to be clear: Such issues are essentially matters of risk and reward to these family offices.
Climate change: Risk & reward
Source
The report finds that climate change ‘is an increasingly important topic affecting not just family offices’ investment portfolios, but also the long-term outlook of operating businesses. This is consistent with the finding that almost half (49%) of family offices view climate change as a top risk over the next five years‘.
In brief: Climate change high among risk and opportunity considerations.
So there you have it; the five major insights from the 2024 UBS Global Family Office Report.
Quote of the week
‘The only question with wealth is, what do you do with it?‘
— John D. Rockefeller
That’s it for this week’s The Benchmark email.
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Invest in knowledge,
Thom
Editor, The Benchmark
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