High-net-worth individuals and wealthy families last year pumped more cash into private equity in the search for higher returns.
According to a report published by the Swiss bank UBS, family offices increased their allocation to private equity to 20% last year, up from around 15% in 2019.
The UBS Global Family Office Report 2022 said that the trend towards private equity, real estate and private debt and away from traditional assets such as fixed income and equities would continue for at least the next five years, as investors sacrifice liquidity for returns.
The report follows a survey of 221 single family offices around the world controlling $493bn of assets and with an average total net worth of $2.2bn. UBS claims the survey to be the largest and most comprehensive of its kind.
Eighty per cent of family offices worldwide invest in private equity, the only asset class where the number of family offices making allocations has risen steadily year after year, up from 77% in 2021 and 75% in 2020.
The report shows that family offices globally are in a new era of strategic asset allocation as high inflation, central bank liquidity and rising interest rates compel them to review their investment options.
Forty-two percent of those surveyed plan to increase direct private equity allocations, while 38% intend to raise investments in private equity funds and funds of funds. Real estate is favoured by 37%, while 27% are turning to private debt.
A third (32%) of the average family office portfolio was allocated to equities in 2021, 15% to fixed income, 12% to real estate and 2% to private debt. Private equity has continued its steady rise, from a 16% average allocation in 2019 (including funds and direct investments) to 21% in 2021.
“Family offices are keeping pace with a period of substantial transformation,” said Joe Stadler, head of UBS Global Wealth Management.
“In response to the Covid-19 pandemic, digital disruption and now a war in Ukraine, they are reviewing their options with greater urgency, as a strategic shift towards additional sources of return and alternative diversifiers gains ground.
“Against challenging market conditions, family offices see the bigger picture and are applying prudence and innovation to their strategic asset allocation.”
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