American Family Offices Expand Investments Despite Geopolitical Fears
In a recent survey, American family offices demonstrated an unexpected confidence in the U.S. economy by ramping up investments in domestic stocks, despite growing concerns regarding a potential "sell America" sentiment associated with ongoing trade tensions. Findings from the UBS Global Family Office Report 2025 reveal that over 70% of these family offices identified a global trade war as their primary concern for the upcoming year.
While the survey was conducted between January 22 and April 4, the implications of events unfolding in early April only reinforced the existing apprehensions among family offices, according to Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management. Cavalli noted the importance of a diversified and all-weather asset allocation strategy, crucial for navigating the tumultuous market environment.
Concerns Shift to Geopolitical Conflicts
Interestingly, the immediate threat posed by the trade war seems to diminish over a longer horizon. When asked about their top fears for the next five years, 61% of family offices highlighted the potential for significant geopolitical conflict as their leading concern, followed closely by the risks of a global recession (53%) and a debt crisis (50%). The trade war, however, only concerned 40% of the respondents as a longer-term threat.
Family offices face various challenges in managing their portfolios, with the foremost obstacles being finding suitable risk-adjusting assets or strategies (38% identified this concern), ensuring predictable safety assets (29%), and managing costs or fees (26%).
Asset Class Preferences Reflect Changing Paradigms
In terms of investment strategies, family offices exhibit a preference for developed market equities, which 46% identified as their chosen asset class, followed by direct private equity investments (37%), private equity funds (34%), and emerging market equities (34%). Regionally, Asia Pacific, excluding Greater China, emerged as the most appealing area for heightened investment, with 35% of family offices targeting this region, closely followed by North America at 32%.
The report, a sixth edition compiled from 317 family offices averaging a net worth of $2.7 billion, reveals a notable pullback in private equity dealings. Ultra-wealthy families are reducing their private equity investments to the lowest levels seen in five years, driven by exit downturns and rising financing costs linked to trade tensions.
Global family offices plan to scale back their exposure to private equity, forecasting a reduction from 21% in 2024 to 18% by 2025. This shift points towards a reallocation strategy amid changing economic factors; direct investments in private equity are expected to decline significantly from 11% to 8% in the same period.
A Cautious Shift Towards Developed Equities and Private Debt
Despite the reduction in private equity, family offices are increasingly reallocating resources towards developed market equities and private debt, both gaining traction among wealthy investors. The share of developed market equities is predicted to rise to 29% in 2025, up from 26% in 2024, while allocations towards private debt are expected to jump from 4% to 5% in the same timeframe.
Comments from family office executives underscore a cautious approach towards private debt, noting it as a fashionable vehicle for chasing yield, while remaining skeptical of its long-term risk-return characteristics.
Regional Perspectives and Expectations for Future Growth
Within Asia, family offices have taken even more conservative stances on private equity, with allocations in Southeast Asia significantly dropping to just 5%, half of what was noted in 2023. Investments in private debt, however, have more than doubled in the region.
Looking ahead, expectations of recovery within the private market landscape persist, with 37% of family offices anticipating a rebound in direct private equity exposure over the next five years. These sentiments reflect a broader optimism, with many family offices managing complexities through diversified portfolios rather than concentrating their investments in any singular asset class.
As the economic landscape continues to evolve, family offices around the globe exhibit resilience and adaptability, ready to recalibrate their investment strategies in response to emerging trends and indicators.
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