Investment Strategies

Wealthy Global Families Keep Smiling On US Stocks – Bernstein Private Wealth

Tom Burroughes Group Editor December 11, 2023

Wealthy Global Families Keep Smiling On US Stocks – Bernstein Private Wealth

We talk to the US wealth management firm about what sort of positioning it is seeing from its clients in the US, and further afield.

Global wealthy families continue to position for US public equity markets to perform well relative to rivals, Bernstein Private Wealth Management has told this news service.

While some wealth management houses are sounding cautious notes about the world’s largest equity market for 2024, the US firm says its clients are more positive in general about the US.

“Another trend within public equity markets, is a continued overweight to the US. Global families look to the US as not only a safe haven in difficult geopolitical and economic times, but also as an area that continues to see growth,” Aaron Bates, who heads the ultra-high net worth business and growth strategies team at the firm told this news service recently. He spoke alongside Chelsea Smith, who heads the firm’s family offices business.

“The time horizons of family offices are “pretty long.” They are still looking for opportunities to jump in [to markets]. They are not panicked or concerned,” Bates said. 

“Family offices, for the first time in a long time, are saying they are looking at bonds because they are finally getting paid and talking about decent yields. In the US, they’re looking at munis in particular,” he said.

“You see global families looking at the US as a safe haven in a difficult geopolitical and economic environment,” he said.

If there is a clear sign that US interest rates have peaked then family offices will want to deploy some of the cash piles they have been sitting on.

As is traditional at the end of a year, wealth managers have been setting out their asset allocation ideas for the next 12 months. At Pictet Asset Management, for example, it predicts that the US economy will slow “dramatically” in 2024 and the firm is taking a “defensive” stance on risk. At French firm Carmignac, it thinks a recession is likely in 2024. At UBS Global Wealth Management, it thinks that central banks will start their interest rate cutting cycles next year. Politics will also have an outsized role in 2024, with the upcoming US elections, and ongoing geopolitical tensions and wars. On a more upbeat note, Citi Global Wealth, part of Citigroup, says although the US economy is likely to slow in early 2024, the US firm thinks that markets will focus on faster growth in the second half of 2024 and into 2025.

Against this background, and given the long-term timescales for wealthy families, they’re looking at alternatives to public markets, and there is a strong interest in private equity, venture capital, and the like, said Bates. 

“We can see families are leaning into private credit,” Bates said, to give one example.

The failures of some regional banks (First Republic, etc) has focused attention on the merits of non-bank alternative sources of credit, he continued.

Risk types
Asked about risks and how the firm considers this, Bates broke it down into three areas: Internal risks (family dynamics, etc); risks to assets (asset allocation and location), and the risks posed by third parties.

For example, on the third-party risk issue, counterparty risks are those that family offices, for example, must comprehend and gain a focus on, Bates said.

The environment for investing has also changed significantly in more than a decade since the start of the post-global financial crisis equity bull run, Bates said. After more than a decade of ultra-low/negative rates, playing the Beta game to capture stock returns will not be as easy, requiring more active management instead.

Shocks and impact
It appears that families aren’t as prepared for shocks as they should be, Bates’ colleague said. 

The firm hosted summits for families, and recently held one on governance for crises. It was found that only a few families have a plan for how to deal with shocks of some kind, Smith told FWR. And they want to make an impact: “Families are asking us about how we can change the world.”

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