Wealthy families like developed market equities more than ever served with a large side order of private assets, according to the latest UBS survey of the sector.
The sixth annual UBS Global Family Office Report found developed market listed shares remain the most popular asset class with an average 26 per cent portfolio allocation that is set to increase further.
“Almost half (46%) anticipated a significant or moderate increase in their allocation to developed market equities,” the UBS study says. “… The liking for public equity extends to emerging markets equities, where more than a third (34%) anticipated a significant or moderate increase.”
Despite scaling back exposure to private equity over the last couple of years, more than a third of family offices intend to dive back in over the long-term into what remains the second most-favoured asset class (21 per cent) as at 2024.
“Looking beyond the near-term challenges with low levels of exits, more than a third (37%) of family offices expect a significant or moderate rise in direct private equity and/or funds / funds of funds (34%), perhaps reversing the trimming of exposures planned by some in 2025,” the report says.
The asset class du jour, private debt – currently representing just 4 per cent average allocation in the 2024 family office portfolios – is also garnering support.
“Additionally, approaching a third (30%) anticipate a significant or moderate increase in private debt, and almost a quarter (23%) in infrastructure,” the UBS study says.
The average family office reported a 56 per cent allocation to traditional listed equities and fixed income instruments with the balance spread across various alternatives including private equity and debt, property (11 per cent), hedge funds (4 per cent) as well as smatterings for gold or precious metals, commodities, infrastructure, art and antiques.
But a potential tilt to more alternatives is likely to come at the expense of mainstream fixed income assets, the UBS study shows.
Almost a quarter of respondent “saw themselves making a significant or moderate increase in their developed market fixed income holdings”.
Cash holdings are also expected to fall further after declining to an average 8 per cent last year from the 2023 high of 10 per cent.
Of those family offices looking to change asset allocations this year “the planned increases in developed market equity and private debt appear to be partly funded by further reductions in cash allocations to 6%”.
However, wealthy families in Asia-Pacific remain more cautious.
“Even ahead of April’s outbreak of trade war, the region’s family offices held an average of 12% in cash or cash equivalents, higher than the 8% global average.”
And while the almost 320 family offices polled by UBS last year hold about 80 per cent of their assets in north America or western Europe, the home bias reached extremes in 2024 for US-based respondents.
“Significantly, US family offices allocated 86% of their portfolios to North America. A multiyear rise from 74% in 2020 shows them cutting their exposure to international markets to the point where it has become marginal,” the report says. “No other region has such a big home bias.”
In a report preamble, UBS global wealth executives Benjamin Cavalli and Yves-Alain Sommerhalder, note that despite rising geopolitical uncertainty, family offices intend to stick with “diversified, all-weather strategic asset allocation” plans.
The UBS study also probes the global family office universe, comprising 317 entities worth a collective US$651 billion, for further information including on sustainability preferences, operational structures and succession planning.