Family Office

Focus On Wealth Transfer, Family Harmony No Surprise In Unsettled Times – Citi Private Bank

Tom Burroughes Group Editor September 24, 2024

Focus On Wealth Transfer, Family Harmony No Surprise In Unsettled Times – Citi Private Bank

Last week, this news service interviewed the private bank about its global survey of family offices' views on investments, the economy, and what holds their attention.

“As we embark on one of the greatest wealth transfers in history, it is not surprising to see the amount of emphasis on wealth transfer,” Hannes Hofmann (pictured), head of the global family office group at Citi Private Bank, told Family Wealth Report when asked about the report’s findings, as published last week. 

“We can see that the focus on fostering family unity and continuity increases with each generational wealth transfer, and what we found interesting about the survey results this year, was that while the next gen wealth transfer was a priority across all family offices, it was more pressing for third-generation families (67 per cent) compared to first-generation (56 per cent)."

FWR interviewed Hofmann on the day the US Federal Reserve cut interest rates by 50 basis points. The publication asked him if, with the shift from cash as shown by the report, he thought the period of higher interest rates in changing allocations has run its course.

“The future path of interest rates is a top concern for survey respondents, with over half citing it as their number one concern. As the rate environment continues to evolve, family offices are moving their cash into investments, with a focus on public and private equity,” he said. “Our investment guidance in the current rate environment continues to include diversification and smart risk-taking that supports families’ long-term view. Family offices are uniquely capable of making long-term investments, so we encourage them to avoid sweeping portfolio alterations based on rate speculations.”

Asked about the optimism over the economic outlook that came out in the report, Hofmann noted, for example, that when looking at alternative investments, family offices are also optimistic about real estate investments. 

“Even as interest rates emerged as family offices’ top concern (according to 52 per cent of respondents), their allocations to real estate remained the most stable for the second year in a row,” Hofmann said.

“It is particularly interesting to see how sentiment differs amongst family offices, depending on where they are based in the world. If you look at the regional breakdowns, the survey reports that family offices in Asia-Pacific and Europe, the Middle East and Africa for example, were the most positive on the outlook for global developed equities, at 48 per cent and 46 per cent respectively,” Hofmann continued. 

“They were also the most bullish toward direct private equity (49 per cent and 53 per cent) and private equity funds (48 per cent and 43 per cent). This differed from those surveyed in Latin America, where they were most keen on Investment Grade Fixed Income,” he said. 

Hofmann brings decades of experience to the role, having been at the US bank since September 2022; before that, he was at JP Morgan where he spent more than 20 years. Most recently, he was the head of multifamily office and intermediaries in the Asia-Pacific, Europe, Middle East & Africa, and Latin America regions. 

Geopolitics is undeniably front of mind for many family offices, he said. 

“It's no secret we are living in a complicated time when it comes to the geopolitical environment. And family offices see this as a risk they feel most unprepared for today – especially as they become global entities,” Hofmann said. 

“Our survey revealed that 71 per cent of family offices were international, with assets or family members located across different countries. To mitigate potential global conflict, we advise our clients to adopt a principal-driven approach that can help them navigate in the landscape in the way that a formal investment office might.

“However, as mentioned earlier, family offices are optimistic about the investment outlook despite these geopolitical concerns – evidenced by their positive portfolio positioning,” he said. 

AI enthusiasm 
Artificial intelligence inevitably made an appearance in the report, and FWR asked Hofmann about what the Citi Private Bank survey had to say about it.

“Family offices have increasingly invested in AI, with half of our survey respondents reporting investments in public or private equities and another quarter actively considering it,” he said. 

“It is interesting to note that AI shows a higher investment rate to that of cryptocurrencies and ESG, for example. However, when it comes to embracing the technology from an operational perspective, it’s true that adoption is lagging. This mirrors much of the broader business environment today, where AI investments and usage are often at a divide,” Hofmann added.

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