The global trade war, sparked by US president, Donald Trump, is seen as the most significant investment risk for 2025 by family offices, the latest UBS report has revealed.
Against a backdrop of economic uncertainty, market volatility and geopolitical risks, family offices are taking the longview, with a growing number diversifying through strategies like manager selection and active management, hedge funds and increasingly precious metals.
[See also: Sir Robin Niblett: ‘new Cold War’ brings risks for business]
Of the 317 family offices, with an average net worth of $2.7 billion, surveyed for the sixth Global Family Office Report, 56 per cent cited geopolitical concerns as a barrier to investing in emerging markets. Family offices are primarily concerned about global trade wars and geopolitical conflicts, with 70 per cent citing trade wars as their top risk for the next 12 months. Looking ahead five years, family offices see geopolitical conflicts and potential recessions as the biggest threats.
Family offices are adjusting their asset allocations to favour developed market equities and private debt while maintaining a stable overall split between traditional and alternative investments.
Key findings from the report include:
- Increased allocation to developed market equities was projected to rise to 29 per cent in 2025 from 26 per cent in 2024
- Private debt allocations doubled to 4 per cent in 2024, with plans to increase to 5 per cent in 2025
- Fixed income allocations were expected to rise from 15 per cent in 2024 to 17 per cent in 2025
- Nearly 80 per cent of assets are in North America and Western Europe
- 41 per cent of family offices are involved in philanthropic efforts related to sustainability
- 46 per cent expect a significant or moderate increase in developed market equities.
- Only 23 per cent plan to increase developed market fixed income holdings.
- 37 per cent foresee a rise in direct private equity investments.
- 30 per cent anticipate increasing private debt allocations
- 53 per cent have a wealth succession plan.
‘Steep learning curve’
When it came to technology, family offices were on a ‘steep learning curve’, the report noted.
‘While some have clear investment strategies covering better-known technologies, it’s apparent that family offices generally are in the early stages of understanding how to invest in the space,’ the report’s authors said.
Content from our partners
[See also: The best family office service advisers]
The surveyed family offices were focusing on areas they felt most comfortable with, and were prioritising investments in healthcare, electrification and artificial intelligence. As one US family office executive said: ‘In terms of technologies, right now we’re focusing mainly on AI, software, healthcare and biotech. But we’re also looking at niche technologies such as power management.’
While family offices were familiar with and keen to embrace AI, harnessing its potential was another matter. Almost two thirds (64 per cent) are familiar with generative AI but don’t have a clear investment strategy, or are unfamiliar and looking to find out more.
[See also: Choosing the right private client wealth management for you]
Succession planning still not a priority for a significant number
Just over half (51 per cent) of family offices have established succession plans, leaving large number without a plan, despite the well-documented risks. Why the delay? One reason the report identified was simply because the beneficial owners are putting it off. Almost a third (29 per cent) of those without a plan said the beneficial owners don’t regard it as a priority or think there’s plenty of time to do it in future. Over a fifth (21 per cent) explained that beneficial owners have not decided how to divide up their wealth, while almost as many (18 per cent) indicated that the owners did not have time to discuss it.
But in four in ten (43 per cent) of cases, the older generation believe the next generation are ready to take on wealth responsibly and in line with family values (see the Murdoch succession skirmish for the difficulties generational differences can cause).
The primary concern is ensuring tax-efficient wealth transfer.
[See also: Len Blavatnik: Family offices ‘should invest’ to power growth of UK life sciences sector]
Sustainability looking more attractive
Family offices are shifting their views on sustainability from risk management to recognising it as an opportunity for investment, with 46 per cent see sustainability as providing attractive opportunities, up from 42 per cent last year. Of the family offices surveyed, 37 per cent are involved in clean tech and health technologies through their investment portfolios.
Family offices are increasingly integrating sustainability and impact considerations into their philanthropic efforts, with varying approaches based on regional influences. Over 41 per cent of family offices engage in philanthropic activities related to sustainability, while 30 per cent incorporate sustainability into their operating businesses.
