Global family office portfolios returned a meager 0.3% in 2015, Campden Wealth Research and UBS reported Wednesday.

This compares with returns of 8.5% in 2013 and 6.1% in 2014.

The report calculated that the average North American family office returned 0.3% in 2015, outpacing those in Asia/Pacific, which were flat, and in emerging markets, which were down 0.6%. European portfolios showed the strongest regional performance, up 0.6%.

The report noted family offices’ sluggish performance contrasted sharply with endowment funds at Yale, Princeton and Harvard, which were up more than 10% in 2015, although U.S. endowments on average returned a more modest 2.4%.

“The endowment funds of top universities tend to be prepared to take greater risks than the average family office, and often have much lower allocations to cash and fixed income,” Campden Wealth’s direct of research Stuart Rutherford said in a statement.

“There is also more stability in their investment approach and management because they don’t have to navigate changes to family control and investment objectives. This enables endowments to seek higher returns in challenging market conditions.”

Campden Wealth conducted an online survey between February and May of 242 family offices around the world with average assets under management of $759 million, including 69 family offices in North America with average assets of $912 million. Three-quarters of participants were single family offices. Campden Wealth also invited a select group of multifamily offices to participate.

The survey showed 36% of family offices were pursuing a growth strategy this year, up from 29% in 2015. However, strategic asset allocations revealed a high degree of regional variation.

Family offices in the U.S. exhibited the most optimism, with a big move to growth allocations. Emerging market participants were much less stressed than in 2015 and cut their preservation allocations dramatically.

In contrast, European participants were decidedly negative, demonstrating their risk-off stance with increased preservation allocations and a cut in growth allocations.

Investment strategies by region

2016                     Growth                  Preservation          Balanced

Global                     36                          21                          43

North America         63                          4                            33

Europe                   13                          33                          53

Asia/Pacific             33                          25                          42

Emerging markets   17                          17                          67

 According to the report, private equity investments became more central to family offices over the past year, currently representing nearly a quarter of the average overall portfolio.

Multi-year participants in the UBS-Campden studies recorded a 2.3 percentage point increase in holdings of private equity investments to 22.1%. At the same time, the average family office reduced its holdings in hedge funds from 9% to 8.1% last year amid concerns about performance and fees.

For their part, participating North American family offices reported larger holdings in riskier asset classes: developed market equities, 23%; direct venture capital/private equity, 12%; hedge funds, 9%; private equity funds, 8%; and cash, 6%.

“The optimism expressed and driving family offices in North America can be seen by their focus on growth opportunities and their emphasis on private equity/venture capital,” John Matthews, head of private wealth management for UBS Wealth Management Americas, said in a statement.

“This more upbeat approach compared to other regions reflects the entrepreneurial mind-set and nature of wealth in North America and the strengthening of the North American economy,” he added.

Millennial influence

The Campden Wealth-UBS study found 61% of family offices were now or expected to be active in impact investing in the foreseeable future, with millennials a key catalyst for this change.

Two-thirds of participants said families with children born after 1980 would see an increase in requests to participate in impact investing.

In addition, philanthropy continues to be a priority for many family offices. One-third of participants said they were likely to increase their philanthropic allocations, while another two-thirds said theirs would remain the same.

Education as a favored cause replaced children and youth as the biggest beneficiary of family office philanthropy this year.

“We have found that some of the wider social considerations of impact investing are also influencing traditional investing,” Rutherford said. “Family office executives are increasingly telling us that the next generation’s social values are causing them to reconsider their asset allocation.”

The report found succession was a looming challenge for family offices. Forty-three percent of study participants expected a generational transition within the next decade, and 69% expected one in the next 15 years.

However, just 37% said their younger family members wanted to be more involved in the family office than they currently were.

Against this backdrop, participants said their main governance priority over the next 12 to 24 months was “implementing a succession plan.”

Only about 40% of respondents said they had personally experienced a successful transition of a family office.

These individuals pointed to several factors that were important:

• A willing and able next generation

• An older generation prepared to give up control

• A flexible and trustworthy family office

“In our experience the risk of disruption from a generational transition should not be underestimated,” Higson said. “It is the number one reason for beneficial owners to make changes to their family office structure and management team.”