Investment allocations by family offices have shifted to more balanced portfolios, with a geographical tilt towards Asia Pacific. Indeed, portfolios have their highest weightings to developed market fixed income for five years, according to the latest UBS Global Family Office Report 2024 survey.
It found that family office portfolios moved back to a greater balance between bonds and equities. Apac family offices are keen to add more developed markets fixed income (48%), and developed markets equities (45%).
There was also increased appetite for alternatives, as Apac family offices plan to increase their allocation in private equity (24% direct investments and 32% funds/funds of funds), private debt (28%) and hedge funds (31%) in the next five years, indicating their need for greater diversification, according to the survey.
Moreover, there is a preference for allocating to their home region.
“Almost half of Apac family offices plan to allocate more assets to Apac over the next five years, with Apac set to be the top investment hotspot globally. Apac family offices plan to add fixed income and equities from developed markets, private equity and hedge funds over the next five years,” said LH Koh, head of UBS Global Family Institutional Wealth Apac.
“Private equity and hedge funds continue to be the favourites among family offices to keep their portfolios well-diversified and achieve better investment returns. When it comes to making a positive impact, healthcare is the top-rated sustainability theme amongst Apac family offices,” he added.
Philanthropy and charitable giving appear especially popular in Asia Pacific, with 45% of family offices saying they currently take it into account — healthcare is the top theme to Apac (59%) family offices.
The UBS survey, published today, collated views from 320 single family offices across seven regions of the world. Representing families with an average net worth of $2.6bn and covering over $600bn of wealth, Apac has the highest number of respondents for the survey.
Asian regional contrasts
North Asian family offices have, on average, high cash holdings (14%) and the highest allocations (24%) to Greater China of all the regions. In comparison with their global peers, the likelihood to invest in AI over the next two to three years is the highest (89%). They prefer high-quality short duration fixed income to enhance portfolio diversification (45%). Over 12 months and in the next five years, North Asian family offices are most concerned about a major geopolitical conflict (56% and 70% respectively).
Among Southeast Asian family offices, 88% believe there will be positive real interest rates for longer. They rely more on manager selection and/or active management to diversify (50%). Compared with their global peers, allocations to real estate are the lowest (6%), on average. A major geopolitical conflict and higher inflation are top concerns (55% each) in the next 12 months, while over the next five years they are higher taxes (59%) and climate change (56%).
Globally, on average, family offices have kept their largest regional allocations in North America (50%), over a quarter (27%) in Western Europe, and 17% in either Asia Pacific or Greater China. Looking ahead, North America and Asia Pacific (excluding Greater China) are set to be the top destinations of added allocations, with over a third looking to increase allocations to each of these regions over the next five years (38% and 35% respectively).
In general, confidence in active management increased as a means of portfolio diversification, with almost four in 10 (39%) family offices globally saying that they are relying more on manager selection and/or active management to enhance portfolio diversification, up 4% from 2023.
Generative AI is the most popular investment theme, with more than three quarters (78%) of family offices stating it is likely to be an area of investment in the next two to three years. Among alternatives, hedge funds are used by a third (33%) of family offices for diversification.
