July 13, 2011

FOX Survey: HNW Families Confident in Economy and Financial Markets

Wealthy families pursuing a more conservative investment philosophy

Wealthy families enjoyed good portfolio performance in 2010, and are likely to remain cautiously optimistic about the economy, continue to make and enact important decisions about asset transfers and invest previously sidelined money, according to a new investment survey released Tuesday by Family Office Exchange (FOX).

"FOX Wealth Trends: 2011 Investment Survey Insights" found that the median family office reported 12% annual pretax portfolio returns in 2010. As a result, families are feeling more confident. About 85% of families and office executives in the survey said 2010 portfolio performance either met or exceeded their expectations. For 2011, families anticipate a median return of 8%.

FOX conducted the survey in the second quarter of 2011. The investable assets of respondents averaged $338 million.

Following are other key findings:

  • Although they are feeling more confident today than during the past two-to-three years, some 40% of respondents consider “loss of capital” as the chief risk facing their families in 2011. They are also worried about liquidity risks, inflation, the U.S. economy, government policies and geopolitical risks.
  • Many families are adjusting their investment philosophy and asset allocation to ensure greater liquidity. Nearly one in five family offices is pursuing a more conservative approach to investing, and about 10% are shifting from U.S.-centered assets.
  • Changes in sentiment and investment philosophy are also influencing asset allocation. Fifty-two percent of respondents plan to decrease their allocation to cash over the coming year, compared with only 9% who intend to increase their cash holdings. About half expect to increase their allocation to international equities in the next 12 months.
  • The survey suggests that families will make significant changes to their network of external advisors. Fifty-nine percent of respondents are looking for an alternative investment manager, and 49% are in the market for a traditional investment manager. More than a quarter are seeking outside help from an investment consultant. And sizable minorities of families plan to end an existing relationship with an advisor.
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