Global Family Office Report 2016

Highlights

Welcome to the third edition of The Global Family Office Report. In partnership with UBS, Campden Wealth Research has surveyed 242 family offices and conducted over 25 interviews with principals, executives and advisers of family offices, with an average size of USD 759 million assets under management. With its unique insights on family offices the Global Family Office Report identifies the future trends of this industry and is the go-to publication for family members and non-family members alike.

Performance: not a standout year

After returning 8.5 per cent in 2013 and 6.1 per cent in 2014, the composite global portfolio of family offices returned a disappointing 0.3 per cent in 2015.

The largest negative impact was derived from liquid market instruments. In this difficult environment family offices continued to focus more on illiquid investments such as private equity and real estate.

There is a strong tendency for families to buy real assets and make direct investments where they can exercise control. These assets are core parts of ultra-high net worth portfolios, and in the last few years have ensured the fortunes of the world’s wealthiest outperforming returns.

Risk appetite is a matter of geography

Overall, the percentage of family offices that are pursuing a growth strategy has increased from 19 per cent to 36 per cent. However, strategic asset allocations reveal a high degree of regional dispersion.

The US family offices remains particularly optimistic, with a big move to ‘growth’ allocations. Emerging market participants have cut their ‘preservation’ allocations dramatically. This indicates that the worries of 2015 seem gone. In contrast, Europe is the standout negative, with its risk-off stance demonstrated by increased ‘preservation’ allocations and a cut in ‘growth’ allocations. Compared to last year family offices in Asia-Pacific are broadly unchanged and moderate optimistic.

Succession is a looming challenge

43 per cent of family offices expect a generational transition within the next 10 years, and 69 per cent in the next 15 years, making this a pressing issue for the community. Yet just 37 per cent find that the younger generation wants to be more involved than they presently are in the family office.

This upcoming generational transfer will also have effect on the ways family offices invest. Two-thirds of family offices agree that families with children born after 1980 will see an increase in requests to participate in impact investing.

Mind the gap

Family office investment return expectations have fallen short of actual returns for almost three years. During the calendar year 2015 when portfolio performance fell to just 0.3% as many listed securities came under pressure during the period of falling energy prices and weaker global growth the gap was particularly pronounced and amounted 8.7% .

In the 2016 report there was a clear message that allocations for 2016 for real assets, private markets, and developing equity would increase with lower allocations planned for hedge funds, bonds and cash. On this basis 2016 weighted returns for year to date end August are approximately 5.5% and result in a gap of 1.6%.1

 

1Calendar 2015 results are published in the 2016 Global Family Office Report. Expectations for future year investment returns are derived from the survey questionnaire finalized in May each year. Given that private equity (PE) is a large component of the calculation this is only an estimate as the full year outcome for PE will not be known until early 2017. 2016 returns are estimated based on these future intentions for allocation and actual performance of the chosen proxy for each portfolio line item.

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