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Family Offices Raise Fixed Income, Private Equity Plays, Go Cautious On Stocks – Study

Tom Burroughes

18 September 2023

A study of 268 family offices around the world by Citi Private Bank found they have raised exposure to fixed income and private equity, making bigger asset allocation changes more than in recent years.

Strikingly, while family offices continue to examine direct investing and two thirds of the officers are hunting value opportunities, 38 per cent have paused new direct investments due to economic uncertainty.

Citi Private Bank’s Global Family Office Group has just released the results of its 2023 Family Office Survey. The bank said that the number of respondents in this year’s survey has more than doubled since last year.

More family offices are focusing on wealth and investment management due to the cloudy macro environment, with less time spent on family unity and continuity compared with previous years. 

Citi Private Bank said that there is a large but narrowing gap between intention and action on sustainable investments – a finding that appears to chime with other surveys about ESG investing.

The top concerns for family offices include inflation, interest rate increases, as well as geopolitical uncertainty amidst heightened US/China tensions. 

With rising asset prices in the first half of 2023, two thirds of respondents saw mark-to-market portfolio increases and nearly every respondent expects positive portfolio returns over the next 12 months. In an environment of rising financial markets, recession fears and multi-year high bond yields in 2023, many family offices have reassessed their asset allocation more in recent years.

More than half of respondents said they have boosted fixed income allocations, 38 per cent have raised private equity allocations, and 38 per cent cut their holdings of listed equities.

Direct investing nerves
While the report found that direct investing remains a strong focus for family offices, 66 per cent of them were hunting opportunistic deals based on attractive valuations, and 38 per cent paused new direct investments due to economic uncertainty. 

Technology was the most popular sector for direct investment in every region apart from Latin America, where there was a preference for real estate . Another disparity was in attitudes toward healthcare, where 58 per cent of family offices in Europe, the Middle East and Africa and 56 per cent of family offices in Asia Pacific named the sector among their top three, compared with 26 per cent in North America.

Furthermore, 74 per cent of family offices reported that their primary focus has shifted toward wealth management and investment management . This is well ahead of fostering family unity and continuity , but this trend is less pronounced for third generation families, who recognize the need to manage critical issues alongside short-term imperatives. 

At the same time, the families themselves are focused on preparing for the future by preserving asset values and preparing the next generation as responsible wealth owners . 

“With inflation, market volatility and geopolitical concerns top of mind amongst ultra-high net worth investors and their families, they are readily diversifying their portfolios and considering direct and sustainable investments. It’s clear they are thinking beyond the now with an eye toward the future,” Ida Liu, global head of Citi Private Bank, said. 

Fieldwork for the study was conducted in June.