Globally, family offices are increasing their allocations to alternative investments, particularly private equity, UBS said in its annual survey.
In a UBS survey, 80 percent of family offices reported investing in private equity, which includes venture capital, up from 77 percent in 2021 and 75 percent in 2020.
«With inflation high, central bank liquidity flagging and interest rates rising, family offices are reviewing their strategic asset allocation. They’re reducing fixed income allocations and sacrificing liquidity for returns, as they increase investments in private equity, real estate and private debt,» UBS said. «Against this backdrop, most believe uncorrelated returns will be harder to find. As they explore new possibilities, they’re looking for alternative diversifiers including active strategies, alongside illiquid assets and derivatives.»
Looking at Earlier Stages
For private equity plays, investing both directly into private businesses and in funds is the favoured approach, the UBS Global Family Office report for 2022 said. Technology, healthcare, social assistance and real estate are common sectors for the investments, the report said.
While family offices mainly invest at the expansion or growth equity stage, more are looking to invest at earlier stages as valuations have risen, the report said; around 63 percent said they usually invest in venture capital, up from 61 percent in 2021 and 53 percent in 2020, the survey found.
Around three-quarters of the family offices planning to increase their private equity investments over three to five years expect the segment will outperform public markets, the report said. It added that over half of that group are also looking for types of investments not available in public markets.
Increasing Sustainability Focus
Sustainability has become a common theme for family offices, the survey found, with more than half allocating to sustainable investments. More than half of those investing sustainably have increased their due diligence, but they told UBS they aren’t confident they can spot greenwashing and that performance evaluation can be an issue. More than a third of family offices are taking an “exclusion” approach of avoiding certain industries or controversial activities, the survey found.
«Concerns about financial performance, once common, are no longer an issue. Family offices think sustainable investments will continue to at least match broader market returns over the next five years. Eight out of ten globally believe this to be the case,» the report said.
UBS said the total wealth covered by the survey this year has more than doubled to US$493 billion, from US$225.7 billion in 2021. The report focused on 221 of the largest single-family offices globally, up from 191 in 2021, with an average net worth of US$2.2 billion, up from US$1.2 billion in 2021.