Ultra-rich families have seen a bounce-back in investment performance over the last year as they have turned to equities and higher risk assets.
Family offices across the globe achieved an average return of 7% in 2016, a significant turnaround for the firms who returned a disappointing 0.3% in 2015, according The Global Family Office Report, the annual review by research firm Camden Wealth and UBS.
The improvement was mainly driven by equities, which now account for over 27% of the average portfolio, the highest proportion of any asset class, as well as more illiquid and higher risk investments.
Dominic Samuelson, chief executive officer Campden Wealth Research, said: ‘I was particularly struck by the improved investment performance achieved by family offices this year, which by and large has been driven by equities which are now taking a larger portion of the family office investment portfolio than ever before.’
Developed market equities emerge as the ‘winners’ of the asset allocation pie, making up 20.4% of all family office portfolio allocations, up from 18.9% in 2016.
Private equity, including venture capital, co-investing and private equity funds, continues to maintain a strong position in portfolios, accounting for a 20.3% share.
North American family offices performed the best globally, averaging 7.7% of their annual investment return. Emerging markets, which include South American, African and Middle Eastern countries, achieved returns of 6.2%.
From the report’s survey of over 262 family offices, the majority (60.6%) plan to maintain their investment in developing market equities, while 21.3% plan to increase it.
Meanwhile 40.2% intend to allocate more to private equity funds, while 49.3% want to do more co-investment where they invest directly into a company alongside another investor.
The report also found that in 2017 family offices in North America and Asia-Pacific tend to be committed to growth investment strategies, while executives in Europe and Emerging Markets are likely to opt for more balanced approaches.