MORE family offices (FOs) worldwide are shifting their portfolios to risk assets from cash, amid optimism about the outlook for their one-year portfolio performance.
This is despite the interest rate trajectory, which includes rates staying high or rising further, being the top concern among global FOs, according to Citi’s 2024 Family Office Survey.
Following the public equities upside in 2023, FOs are shifting their portfolios from cash to risk assets. The report said 43 per cent of FOs surveyed globally raised their exposure to public and private equity.
Some 49 per cent of respondents increased their allocation to fixed income as yields near multi-year highs, while 43 per cent upped their weighting in resurgent public equity markets, from 20 per cent in 2023.
FOs surveyed also showed appetite for private equity, with 42 per cent raising allocations, from 38 per cent last year.
In 2024, 31 per cent of respondents had allocated to cash, compared with almost half of respondents in 2023.
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This comes as 97 per cent of respondents expected positive portfolio returns over a 12-month horizon. Half of the respondents expected returns of between 5 and 10 per cent, while another one-third anticipated 10 to 15 per cent.
Sentiment around the outlook for asset classes was more positive than last year, with the most confidence in direct private equity, private equity via funds and global developed equities.
The report also noted that for the first time since 2021, inflation was no longer the top concern among respondents. Instead, it has been replaced with concerns over the interest rate outlook, US-China relations, and market overvaluation.
By portfolio allocation, public equities rose to 28 per cent from 22 per cent a year ago, and fixed income was up to 18 per cent from 16 per cent.
The increase in public equities was attributable both to putting cash to work, and the markets’ continued rally from their 2022 lows, the report said.
Private equity slipped to 17 per cent from 22 per cent, which may have been accentuated by valuations taking longer to adjust upwards compared to those of public equity.
By geography, North America had the highest overall weighted allocations, followed by Europe and the Asia-Pacific excluding China.
Allocations to China almost halved to 5 per cent from 8 per cent since last year, due to the country’s ongoing economic challenges and market unease.
For Asia-Pacific FOs, 68 per cent of those surveyed have increased their allocation into public equity, the highest relative to other regions.
Direct investing activity was also the highest in the Asia-Pacific region, with 69 per cent of respondents reporting increased activity.
These FOs said they were positive on the outlook for global developed equities, direct private equity and private equity funds.
Globally, the report noted that asset preservation and preparing the next generation for future responsibilities are families’ top concerns.
“This underscores the dual priorities of family principals who seek to prepare wealth for their families and to prepare their family members to be stewards of that wealth,” Citi said.
Meanwhile, meeting family members’ expectations was the top challenge, overtaking adapting to market conditions.
The survey, conducted between Jun 4 and Jul 15, 2024, drew responses from 338 participants, with 21 per cent of responses from Asia-Pacific; 28 per cent from Europe, the Middle East and Africa; 14 per cent from Latin America; and 36 per cent from North America.
