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Apac family offices plan shift in asset allocation – report

UBS’ latest Global Family Office report shows that family offices are re-positioning their portfolios in light of interest rate changes.

As central banks raise interest rates, Asia Pacific family offices are planning “the biggest shift in strategic asset allocation for several years”, according to the UBS Global Family Office Report 2023.

While family offices in Apac had the highest allocation to equities (37%), the report noted that 41% are planning to increase their allocation to developed market fixed income. In addition, 35% will invest more in emerging market equities, prompted by the weakening of the US dollar and China’s reopening.

Meanwhile, there continues to be a strong preference for alternatives to help diversify and almost half of the Apac family offices surveyed (46%) prefer to use hedge funds to diversify their portfolio, which is higher than the global average of 33% only.

Moreover, 80% of family offices expect hedge funds to meet or exceed their performance targets over the next year. The allocation to hedge funds for family offices in Apac has risen to 5% from 3%.

“It’s the end of an era for low or negative nominal interest rates and the ample liquidity that followed the global financial crisis. Against that backdrop, our research shows that family offices are making major changes to ensure they’re positioned for growth and success,” said George Athanasopoulos, head of global family and institutional wealth and co-head of global markets at UBS.

“While current market and geopolitical trends have prompted a shift to liquid, short-dated fixed income, 66% of family offices still believe that illiquidity boosts returns in the long term and they’re looking to further increase allocations to alternatives like hedge funds, private equity funds and private debt to further diversify their private markets allocations.”

For other alternative investments, 27% of family offices in Apac responded that they plan to raise private equity direct allocations over the next five years, while more than half (53%) of Apac family offices that invest in private equity prefer to invest using funds as they deliver diversification and can allow family offices to enter markets where they do not have in-house expertise.

Within private equity investment, the survey found that Apac family offices are most interested in technology, healthcare, information and communications, real estate and rental leasing.

With interest rates remaining high this year, family offices are cautiously cutting their allocation to real estate investment for 2023, but 13% of the Apac respondents said they foresee a higher allocation over the next five years.

The UBS report surveyed 230 single family offices around the world, with a total net worth of $495.8bn and an average total net worth of $2.2bn. In Apac, 45 single family offices participated in the survey.

Part of the Mark Allen Group.