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North American Family Offices Eye Up Cannabis and Crypto Investments

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What You Need to Know

  • Eighty-six percent of North American family offices report that their wealth increased over 2020 and 2021.
  • Health care is by far the most popular area for investment. Cannabis and crypto are promising.
  • North American families prioritized cybersecurity over succession planning.

Eighty-six percent of North American family offices report that their wealth increased over 2020 and 2021, well ahead of the global average of 79%, according to a recent study from Campden Research. These family offices’ assets under management grew by 58%, just three percentage points below the global average. 

They were also more likely then family offices elsewhere to say they were investing in cannabis or cryptocurrency, or would consider doing so.

The research covered 385 family offices worldwide and 179 in North America.

Twenty-four percent of families said they have taken advantage of the legalization of cannabis around North America to invest in the sector, compared with the global average of just 18%. Forty-one percent of respondents said cannabis could be a promising investment that family offices should consider, versus 33% of global peers who agreed.

Similarly, North American family offices had the edge on global contemporaries in their investments in cryptocurrency: 31% versus 28%. With an average 40% return in 2020, crypto is a promising investment, many North American families agreed.

In 2020, North American family office portfolios enjoyed robust equity returns, averaging 19% for developed markets and 16% for developing markets. This year, equities accounted for 34% of the average portfolio — 29% for developed and 5% for emerging markets. 

Three in 10 family offices said they planned to increase their allocations to developing market equities in 2022.

Campden Research noted that in 2021, 45% of North American families said they favored a growth-oriented investment strategy, up from only 31% who opted for that approach in 2019. 

The result: the average family office portfolio achieved 15% returns, two points ahead of the global average.

Given the increase in their wealth, North American families in the study reported that they have significantly expanded their offices, structures and services over the past 12 months. 

Information technology infrastructure had the biggest growth, at 45%, in line with the growing popularity of transactions using financial technology. 

Thirty-four percent of respondents said fintech plays a role in their dealings at present, but 61% agreed that fintech would probably replace traditional banking services in the future.

According to Campden Research, health care is by far the most popular area for investment for 74% of North American families, followed by biotech at 64%, fintech at 61% and artificial intelligence at 49%.

Room for Improvement

Campden Research found that North American families prioritized cybersecurity over succession planning. Seventy-seven percent of respondents said they had a cybersecurity plan, though 55% acknowledged that their plan could be better. 

At the same time, just 50% of North American families said they have a succession plan in place. This compared with 70% of family offices in the Asia/Pacific region and 52% in Europe.

Of the North American families who said they have a plan, only 20% had a formally written plan. Twenty-seven percent of family offices admitted that they are unprepared for succession.

In turn, 55% of North American families reported that their next generation was either somewhat or very unprepared to take over control. Almost a third said the biggest obstacle in succession planning was the reluctance of the patriarch or matriarch to make way for the next generation.