Family offices continued to shift their investment strategies in the second quarter of 2024, showing a growing preference for equities in what continues to be an uncertain market, a Citi Private Bank report has revealed.
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Despite geopolitical instability, family offices continued to reduce cash holdings to add exposure to fixed income and equities in the second quarter, the Family Office Investment Report showed.
Equities saw increased allocations in three of four regions on an equal-weighted view, with allocations for family offices with large portfolios at Citi Private Bank rising in every region.
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On an equal-weighted basis, family offices allocated 22.4 per cent of assets to fixed income at the end of June 2024. Equities accounted for 35 per cent of allocations.
Within equities, family offices had a preference for developed large caps, with FOs in all regions except North America reducing allocations to small and mid cap (SMID) equities. There was a modest renewed interest in fixed income, reflecting the challenging conditions faced by fixed income investments in Q2.
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Portfolio positioning and shifts
The quarterly Family Office Investment Report gives a snapshot of the investment decisions made by family offices. The analysis draws on data from 1,200 single-family office clients around the globe, examining portfolio positions and shifts at both global and regional levels.
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Its Q2 data revealed significantly increased private equity allocations in two regions, with minor retreats in two other regions.
Global equities posted another quarterly gain, with emerging markets including India, China, and Taiwan taking the lead in Q2. In developed markets, the UK, which had been a long-time underperformer, showed signs of recovery, while Europe experienced a pullback.
This upswing followed a period of increased equity holdings by Citi Private Bank family office clients in the first quarter of the year.
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The fixed income market exhibited patterns similar to the previous quarter. Higher-quality corporate and sovereign bonds in developed markets remained flat or slightly declined, while high yield bonds and emerging market debt showed stronger performance.
Within alternatives, the survey highlighted the continued allocation to hedge funds; hedge fund allocations went up in every region except Latin America, while the trend was mixed for family offices with larger portfolios at Citi Private Bank. Family offices found value in the potential of hedge funds to navigate the complexities of the current market environment, the report suggested.
Renewed market optimism
A further easing of inflation, an interest rate cut by the European Central Bank, and renewed hopes for a stimulus-driven recovery in China contributed to sustained investor optimism, dented slightly by delayed cuts in US interest rates and initial market reactions to election outcomes in India, Mexico, and France.
In the second quarter of 2024, risk assets continued to show positive momentum, although the pace slowed slightly compared to the gains seen in the first quarter.
