Family Office Asset Allocations

Author

Mr FamilyOffice
November 24, 2023

Family Office Asset Allocations

Keeping things simple this week with a summary of the latest stats from Citi on family office asset allocation and sentiment

Average Family Office Allocations by Asset Class in 2023:

Families remain heavily invested in alternative assets

Note - this summarizes the family office data of Citi customers, so doesn’t necessarily reflect the market as a whole

Key findings from the Citi survey:

▶ Increased allocations to fixed income and private equity amid broad portfolio reassessment

In response to fluctuating markets and high bond yields, family offices have notably altered their investments: over 50% increased fixed income, while 38% boosted private equity and another 38% reduced public equity

Asset allocations in the last year:

▶ Top concerns were about preserving asset values and preparing the next generation

The top family concerns:

  • preserving asset values (68%)

  • preparing the next generation to be responsible wealth owners (60%)

  • ensuring shared goals and vision for the family (52%).

Macro-economic concerns:

  • inflation (56%)

  • interest rate increases (51%)

  • US-China relations (48%)

▶ Rising portfolio values in the first half of 2023, widespread optimism for the year ahead

Two-thirds of respondents saw mark-to-market portfolio increases

Estimated year-to-date M2M portfolio change:

▶ Continued focus on direct investments, but some caution too

  • 80% of family offices engaged in direct investing

  • 66% said they were seeking opportunistic deals based on attractive valuations

  • 38% had paused new direct investments due to economic uncertainty

Direct investing strategy adjustments:

▶ More family office focus on wealth and investment management, less on family unity and continuity, despite growing concerns from families

Family offices’ primary focus:

  • wealth management (74%)

  • investment management (55%).

  • family unity and continuity (21%)

▶ The investment function is professionalizing fastest within family offices

Most progress in professionalization is in the investment function with initiatives like the implementation of Investment Committees (64%) and IPS (51%)

▶ Changing families and a shifting operating landscape represent challenges but also opportunities for family offices

  • Adapting to changing conditions was the top challenge (52%)

  • meeting the needs and expectations of family members (50%).

▶ Large but narrowing gap between intention and action on sustainable investments

Growing sustainable concerns and action is slowly beginning to reflect this

Preferred investments for sustainable investments:

▶ Philanthropic focus has yet to adjust to the rising generation’s priorities

Families believe that a generational philanthropic transition is coming. They are:

  • seeking support to engage the next generation and plan philanthropic leadership succession (38%)

  • integrating philanthropy as part of the greater wealth planning strategy (34%)

Source of all data: Citi Private Bank, Global Family Office Survey Insights 2023

The full survey report can be downloaded here

𝕏 highlights

It’s not just Citi surveying their family office customers. The UBS Global Family Office Survey

The Family Office Investment Committee

How to lose it all

📚 what to read

Titan - The Life of John D Rockefeller Sr by Ron Chernow

Stunning biography of America's first billionaire and the founder of Standard Oil. Top of my re-read list

📻 what to listen to

In the Rachman Review - the FT’s chief foreign correspondent interviews politicians and decision-makers about world affairs - a sober contrast to the hot takes on Twitter

📰 family offices news roundup

And finally…

Fairly short newsletter this week as things got busy quickly and I’m running out of headspace

Drop me an email if you would like to share your experiences or have feedback on the newsletter. And let me know your recommendations for what to read/watch/listen to. Family office related or not!

Coming up soon, venture capital and family offices, why family offices pass on investments, and some guest contributors

Until next time

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