Family offices pile into developed-market bonds to rebalance their portfolios: UBS survey

Geopolitical uncertainties were seen as the main risk by family offices in the short and medium term, with climate change also a major worry
Family offices are increasingly interested in impact investing, with 30 per cent of them focusing on education, healthcare, and clean tech, the survey found

Banking & finance

Mia Castagnone

Published: 4:17pm, 22 May 2024

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Having a balanced and diversified portfolio is once again the top priority for family offices around the world, according to a global survey by UBS.

“Balance is back and stability returns,” said Benjamin Cavalli, the head of global wealth management at the Swiss bank. “Family office portfolios appear to be sort of moving back into a more balanced state.”

Family offices globally prioritised striking the right balance in their investments, with equities and fixed income leading the way.

Their allocation to developed-market bonds increased by the most in five years to 16 per cent, which reintroduced a greater balance between fixed income and equities, said Cavalli.

“This was not totally surprising given where interest rates are,” he added.

Equities and fixed income were the top two asset classes that the chief financial officers managing the portfolios in the Asia-Pacific region said they were interested in.

The report, released annually, surveyed 320 family offices in more than 30 countries between January and March this year representing families with an average net worth of US$2.6 billion. Since it acquired Credit Suisse, UBS now has US$5.5 trillion in assets under management.

Almost half of Asia-Pacific family offices plan to add fixed income and equities from developed markets, private equity and hedge funds over the next five years, according to LH Koh, the head of UBS global family institutional wealth for Asia-Pacific.

Private equity and hedge funds continued to be the top choice among family offices to keep their portfolios well diversified and achieve better investment returns, he added.

Sentiment among family offices in Hong Kong remained strong, the survey found, thanks to the attractive policies for setting up shop in the city, as well as its status as a leading global financial centre.

In an effort to attract more ultra-rich families to the city, the government has taken several steps to support family offices, including the establishment of a dedicated family office team and the introduction of tax concessions for single family offices.

Geopolitical uncertainties were seen as the main risk by family offices in the short and medium term. Climate change was the main concern over the next five years.

The majority of family offices said they will take the same amount of risk with their investments in the next 12 to 18 months as they did last year.

Some 58 per cent said they are concerned about the possibility of a major geopolitical conflict and its possible impact on their financial objectives.

Meanwhile the costs of running a family office are projected to stabilise in 2024, after they rose slightly last year. Most family offices employ up to about 10 staff, even though that is only enough to efficiently manage the core tasks such as managing investments and performing administration, the study found.

Family offices are increasingly interested in impact investing, with 30 per cent of respondents focusing on education, healthcare, and clean tech.

Overall, family offices globally prioritised North America and the Asia-Pacific region for investment, with artificial intelligence, health tech, and sustainability being the most popular sectors.

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