Family Offices Asset Class Focus

Everyone wonder the asset class in which family offices choose to invest. While I was talking about this very topic on television Wednesday, some of you wanted to learn further on family offices investments.

So, I’m gladly sharing with you the results of a report* I’ve read recently. Themed “Family offices** investment strategy and asset focus by region”, the report shows us some interesting facts.

According to the results of surveys conducted in Europe, North America, Asia Pacific and Emerging Markets, the following assets constitute family offices’ portfolio in general:

  • Fixed income securities
  • Bonds
  • Private Equity
  • Real Estate
  • Hedge Funds
  • Commodities
  • Cash or equivalent

Compared with those in Asia-Pacific, who allocate just 2.9% to hedge funds, family offices in North America mostly trust in bonds and the private industry and they are the keenest on hedge funds, with an average portfolio allocation of six percent, while those in the Emerging Markets allocated the least (around 20%).

As for the fixed income investments, it is the developing market economies that rank first. They may be choosing to allocate assets to bonds and hedge funds due to their past painful experiences about inflation and drastic exchange rate rises. Family offices in Asia-Pacific rank second after Developing Country family offices that invest almost 25% of their assets in fixed income securities. North Americans, on the other hand, rank the bottom of the list as they are not equally devoted in this asset class as the Europeans.

“In Emerging Economies, family offices keep their cash reserves…”

Obviously in developing countries, real estate gained the greatest traction lately, with allocations rising more than any other asset class, by almost 30%. Europeans too seem to be keen investors in real estate as their counterparts in developing countries. North America takes the last place in this list.

Private equity fared the best of all asset classes this year in Europe, achieving an average allocation of 20%. Family offices in developing countries on the other hand seem to be more interested in this asset class compared to Asia-Pacific.

Although the report indicates that family office do not appear to be very interested in investing in commodities and Hedge Funds, North America mostly trust in Hedge Funds while Asia-Pacific are keen on commodities. But Developing Countries are the keenest on both asset classes with an average allocation of 5-6%.

Regarding allocations to cash or equivalent, Developing Countries are well ahead. Family Offices invest 12-13% of their customers’ money in cash or equivalent. In this asset class, Asia-Pacific and Europe are racing side by side while North America does not seem to be very keen on allocating assets to cash.

So, we have completed an analysis of a report on family offices investment choices.

Prof. Dr. Emre ALKİN

  • Global Family Office Report, UBS 2019

** Family offices are private wealth management consulting firms that serve ultra-high-net-worth investors. They are responsible for managing the financial and investment side of an affluent individual or family. They provide a wide range of services fashioned to meet the needs of ultra-high-net-worth families, including budgeting, insurance, charitable giving advice, wealth transfer, tax services, as well as non-financial matters such as private schooling, travel arrangements, and other household arrangements.