After its survey emerged a few weeks ago, Citi Private Bank spoke again to this news service about the insights it gleaned, and also reflected on why it gained such a large increase in responses this year.
A more than doubling in the number of single-family offices who took part in Citi Private Bank’s Global Family Office Survey shows that these institutions want a clear idea of what their peers want and worry about during a period of economic change and market uncertainty, the US bank says after analysing responses from 268 family offices.
A few days ago, this news service reported on a new family offices investment report from the US of 1,200 institutions. Among other findings, the study showed that family offices switched cash into riskier assets in the second quarter of this year, suggesting that confidence in markets has returned. On a global equal-weighted basis, the average cash holding was 30.1 per cent, and on a capital-weighted basis, it was 22.4 per cent. This compares with a 12 per cent allocation to cash and cash equivalents according to Citi’s global survey.
With interest rates having risen several notches in the past year – possibly now near a peak – the collective asset allocation clout of family offices – several trillion dollars and almost as large as the wealth of sovereign wealth funds – is significant. They are now an increasingly understood part of the investment landscape, although they remain relatively under the radar.
A general finding from the survey is that while family offices have not ignored risk, they haven’t fled equities to hunker into cash. Instead, they have gone into parts of the fixed income market and not tried to time the market by taking risk off entirely, Hannes Hofmann, global head, global family office group, at Citi Private Bank, told this news service.
Single-family offices have also shifted money into the private equity space, if not at quite the pace as in the past.
“They [family offices] have acted like sophisticated asset allocators, with 51 per cent of respondents increasing allocations to fixed income, 38 per cent to private equity, while 38 per cent have decreased allocations to public equity and 24 per cent to cash,” Hofmann said.
Other findings from the report, Hofmann said, were how there is still an important focus on direct investment by family offices – bypassing funds structures to go straight to the companies in question.
“The Global Family Office Group specialises in providing access to all areas of Citi for our most sophisticated clients, making the balance sheet [of Citigroup] available and making deal flow accessible [to such family offices],” he continued. “We are seeing a continued need to work with families over direct investment.”
Elsewhere, Hofmann drew attention to a finding in the report that family offices have lost some – if not all – of their enthusiasm for cryptocurrencies and digital assets, rattled by some of the market losses and sagas of the past two years (the demise of FTX, the slump in some so-called “stablecoins,” etc). “Two years ago, a lot of them were interested in cryptos…today, with only 8 per cent of family offices are being bullish, cryptos are the least sought after asset class in our survey …technology demand has shifted to areas such as generative AI.”
Beyond general themes for all family offices worldwide, the report also pinpointed regional differences based on the two thirds of respondents who were outside North America – reflecting Citi’s footprint. European family offices have been worried about Russia and Ukraine; the US has been focused on rising interest rates, Latin America has been concerned about rising inflation, and in Asia-Pacific, family offices have been focused on China-US relations.
The world’s single-family offices sector continues to become more professionalised, more interested in outsourcing functions that can’t be economically performed in-house and interested in best practice in areas such as cost management and cybersecurity, Hofmann said. There are detailed findings in the survey about operational priorities of family offices, that will be useful for those looking to benchmark against peers on a confidential basis, he added.
Editor’s note: The business of producing reports and surveys about family offices is becoming crowded, potentially leading to a law of diminishing returns in their impact. By our reckoning, the following reports have been issued except the KPMG/Agreus one:
-- UBS Global Family Office Report;
-- Credit Suisse SFO Survey Report;
-- BlackRock Global Family Office Survey;
-- Citi Report – Direct Investment by Family Offices;
-- Dentons Family Office Direct Investing Report;
-- Goldman Sachs Family Office Survey;
-- North America Family Office Report – RBC (& Camden);
-- Morgan Stanley Single Family Office Best Practice;
-- PwC Family Office Deals Study;
-- The Global State of Family Offices – Cap Gemini; and
This news service intends to undertake a “meta-study” of these reports to see what common points – and striking differences – exist. To comment, email email@example.com