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September 13, 2017 at 08:00 AM
The composite global portfolio of family offices returned 7% in 2016, rebounding from a skimpy 0.3% return in 2015, according to the latest global family office report from Campden Wealth Research, in partnership with UBS.
The report said equities and private equity propelled the recovery, counterbalancing the more subdued performance of real estate and hedge funds.
The findings were based on an online survey conducted between February and May of principals and executives in 262 family offices with an average size of $921 million in assets under management.
Equities now represent 27% and private equity 20% of the average family office’s investment portfolio, according to the survey.
This share is likely to grow further as 82% of family offices plan to maintain or increase their investments in developing market equities, and 40% intend to allocate more to private equity funds and 49% to co-investments.
“Family offices have been making the most of their ability to embrace risk and invest for the long term, increasingly accepting illiquidity, much like other sophisticated investors,” Sara Ferrari, head of global family office group at UBS, said in a statement.
“North American family offices invested more than any other region into growth orientated strategies, and this strategy paid off as they outperformed.”
Indeed, North American family offices had the best return globally, 7.7%, owing to their relatively lower allocations to real estate in favor of equities and private equity.
A recent report by Tiger 21 revealed that high-net-worth investors have been moving more of their assets into real estate — an average of 33% of their portfolios.
As family offices look to increase their allocations to direct investing and co-investing, “many are struggling to source interesting deals and find the right partners, and face challenges related to due diligence, as their in-house resources are often tight,” Campden Wealth’s director of research Rebecca Gooch said in the statement.
“In turn, some of those who are co-investing successfully told us that they source their deals through personal networks or choose to co-invest alongside funds for their due diligence capabilities. Families who wish to co-invest more may consider following similar approaches.”
The report’s cross-regional analysis showed important variations between portfolio management strategies pursued by family offices across the globe.
North America- and Asia/Pacific-based ones tend to be committed to growth, while executives in Europe and emerging markets are likely to opt for more balanced approaches.
Inside Family Offices
The Campden Wealth/UBS statement noted that the previous year’s survey had found that 69% of family offices expected to undergo a generational wealth transfer within the next 15 years.
