geopolitics

UBS has published its Global Family Office Report 2024, which collects insights from 320 single family offices across seven regions of the world. The report’s insights represent families with an average net worth of USD 2.6 billion, covering over USD 600 billion of wealth.

The report finds that family office portfolios have moved back to a greater balance between bonds and equities. Further, on average, family offices have kept their largest regional allocations in North America (50 per cent), over a quarter (27 per cent) in Western Europe, and 17 per cent in either Asia-Pacific or Greater China. 

It shared that, 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 per cent and 35 per cent respectively).

According to the UBS findings, generative AI is the most popular investment theme, with more than three-quarters (78 per cent) of family offices stating it is likely to be an area of investment in the next two to three years.

Sustainability was also found to be becoming an increasingly important topic affecting not just family offices’ investment portfolios, but also the long-term outlook of operating businesses. 

Fifty-seven per cent of family offices with an operating business are either taking sustainability considerations into account already for their operating businesses or plan to do so in the future. 

Further, according to 37 per cent of respondents, better data analytics to measure the impact of investments and/or business operations would help in achieving sustainability and/or impact goals.

Geopolitics was also found to be the top concern for family offices (62 per cent), followed by climate change in the medium term, indeed, nearly half (49 per cent) are concerned about climate change. 

Over 12 months, 58 per cent are worried about the possibility of a major geopolitical conflict. Meanwhile, 37 per cent of family offices have concerns about higher interest rates 39 per cent have concerns about higher inflation, and 48 per cent are concerned about a debt crisis at a time when Western countries are burdened by high levels of public debt that might appear unsustainable.

Regionally, compared to global peers, Middle Eastern family offices were found to have, on average, the highest allocations to real estate (15 per cent) and use high-quality short-duration fixed income to enhance portfolio diversification less than their global peers (10 per cent).

In the next 12 months, Middle Eastern family offices are most concerned about a major geopolitical conflict (68 per cent), and over the next five years, they are most worried about a financial market crisis (57 per cent).

Read the full report here.