The Global Family Office Report (by UBS/ Campden Research) series remains the most extensive study of its kind for beneficial owners, family office professionals and service providers, and is well worth a review. The Executive Summary includes the following conclusions:
1. PERFORMANCE - A record breaking year : Family office investment performance experienced average portfolio returns of 15% in 2017 (up from 7% in 2016 and <1% in 2015) (page 41).
2. SUSTAINABLE INVESTING - Managing wealth with purpose : 40% of family offices are involved in sustainable investing, with the most common areas being clean energy, water, gender equality and healthcare. Nearly half plan to increase their sustainable investments over the next 12 months (page 36).
3. IMPACT INVESTING - Heating up : A third of family offices are now engaged in impact investing – a rise of 4% over the year – with the most common vehicle for investing being via Private Equity (page 37).
4. SUCCESSION - Next Generation begins to come on board : Nearly a third of respondents report that the next generation already hold management or executive positions in the family office, while a quarter reported that they sit on the board (page 66).
5. ASSET ALLOCATION - Unique profiles across regions : The average global family office portfolio includes: Cash 7%; Fixed Income 16%; Equities 28%; Direct Real Estate 17%; Direct business investments 14%; and Alternative managers 18% (pages 19 and 25). Home-bias shows in Equity allocations while the Europeans hold the most Direct real estate. The average leverage added to portfolios is 17% (albeit mostly related to Direct Real Estate and Private Equity).
6. Also worthy of note is the section on INVESTMENT STRATEGY (page 23). This notes that:
- Almost half (45%) of respondents opt for a Balanced investment strategy, with approximately a quarter each opting for Growth and Preservation strategies.
- Europe has the highest allocation to Preservation (38%), while APAC has the lowest (8%). Conversely, North America and APAC have the highest allocation to Growth (c40%).
- Three-quarters of investors agree or strongly agree that they focus on a Diversified portfolio with liquid, traditional assets.
- More than half also agree that they focus on the full spectrum of risk premia (including Alternatives etc).
7. EQUITIES - Markets flying high : Equity market returns reached 23% and 38% for Developed and Emerging Market Equities, respectively. Equity allocations jumped 5% over the year, driven by a 4% rise in Developed Market Equity investment (page 41).
8. PRIVATE EQUITY - Continues to climb : Allocations to Private Equity now account for 22% of the average family office portfolio, comprising 8% in funds and 14% in Direct business investment (page 29).
9. HEDGE FUNDS - Allocations trimmed again : Allocations to Hedge Funds have been falling since 2015, with a 3% decline this year. Hedge Funds now account for just 6% of the average family office portfolio, which compares to 8% in Private Equity funds (page 35).
10. REAL ESTATE - Increased exposure : Family offices have increased Direct Real Estate investments by 2% over the year to 17%. In Europe, Direct Real Estate accounts for 23% of the average family office portfolio (page 34).
