Family offices, looking at emerging markets, recorded a healthy 7% last year
Equities and private equity drove a turnaround in family office investment performance this past year, as revealed in the newly-released Global Family Office Report 2017 (GFO).
The composite global portfolio of family offices (FOs) returned a healthy 7% in 2016, compared with 2015’s disappointing 0.3%. Growth was driven by equities and private equities, which represent a combined 47% of family office portfolio. Meanwhile, performance of hedge funds and real estate was more subdued, and their popularity among FOs declined accordingly.
Other key findings from the GFO, released today by Campden Wealth in partnership with UBS, was the trend towards millennial-driven impact investing, along with strong commitment to philanthropy, and a slowness among FOs to prepare adequate succession plans.
GFO 2017 analysed survey data from 262 family offices from around the world—the largest pool of participants since the study began four years ago. Researchers also conducted 25 in-depth interviews with family office principals, executives and advisers.
“Some of those who are co-investing successfully told us they source their deals through personal networks or choose to co-invest alongside funds for their due diligence capabilities,” Dr Rebecca Gooch, director of research at Campden Wealth, said.
Sara Ferrari, head of global family office group at UBS, said the report showed FOs were increasingly sophisticated in their investment style: They were more willing to accept illiquidity and risk, particularly in North America where 49.1% of family offices were pursuing a growth-focused investment strategy, compared to 23.3% of European family offices. American FOs were rewarded when return performance (7.7%) outstripped that of other regions.
Ferrari said the 2017 report showed as millennials became more involved in their family offices, they were nudging along the trend towards impact investing, with 40% of FOs saying they planned to increase their allocation in this investment class over the next year.
“This is an opportunity for family offices to use their investment expertise to convert social objectives into financial concepts,” Ferrari said.
“The GFO is the culmination of 12 months’ work, engaging hundreds of family offices around the world, gathering and analysing data and putting together the 80-page document. All to gain insight into one of the most discreet but fast-growing wealth sectors” Gooch added.
Campden Wealth estimates there are 5,300 family offices in existence globally—including single family offices and private multi-family offices.
A family office is, in its simplest form, the private office for a family of significant wealth. The number of staff working in the office can vary from one or two employees, to 100 or more staff, depending on the type and number of services it provides.
The UBS/Campden report is based on a survey of 262 families between February and May with an average wealth of $921 million. Sixty-eight per cent of respondents manage money for a single family. Year-over-year data draw on responses from more than 100 family offices that completed the survey in 2016 and 2017.