Confidence among wealthy investors is growing but they are sticking to a more conservative investment style and philosophy, the new Family Office Exchange survey shows.

The survey, FOX Wealth Trends: 2011 Investment Survey Insights, is the fifth since the financial crisis and catalogs the sentiment of the ultra wealthy through a survey sample of respondents whose investible assets average $338 million.

The latest results reveal that investors’ confidence has risen to the point where they are now more willing to make decisions about their financial assets, boosted by a healthy investment performance last year.

In 2010, the median family office in the sample reported annual pretax profit returns of 12 per cent; this year, the figure is predicted to be 8 per cent, reflecting the long-term performance target of 7-8 per cent of family offices as surveyed by FOX over the past 20 years.

“Assuming the economy withstands the recent uncertainty,” says David Lincoln, FOX managing director of research, “we believe families are likely to remain cautiously optimistic about the economy, continue to make and enact important decisions about asset transfers, and invest money that they had previously sidelined.”

This is against a backdrop of still largely negative data coming out of the US – such as the employment data for June – and contagion appearing to spread quickly in the eurozone. However, there are signs inflationary pressures globally are peaking, which could provide a boost to investors.

Changing times

But investors have not yet forgotten the turbulence of 2008 and cited “loss of capital” as the number one threat to their families this year. Also, over a quarter of survey respondents said they were adjusting their investment philosophies to maintain greater liquidity, according to FOX. A full 74 per cent are adjusting their philosophy in some way as a response to the rocky ride over the last three years.

Another trend is that nearly half of the investors plan to increase their allocation to international equities over the next 12 months, and 10 per cent are actually “shifting away” from US assets, as the country continues to suffer from economic and political issues such as the continued debate over the debt ceiling.

Changing faces

Another notable result to come out of FOX’s research is that, “in survey after survey, families seem willing to make significant changes [to their advisory team]. FOX Wealth Trends suggest that 59 per cent of families are in the market for an alternative investment manager; 49 per cent are searching for a traditional investment manager.”

Also in demand is external help from investment consultants, with 26 per cent of offices seeking this.

The report says that while it can offer no “definitive answer” on whether families plan to expand their advisor “ecosystems” the firm expects this to be the case. Drivers of this dynamic on the demand side include cost-conscious families “seeking a higher-quality array of options for external advice from which to choose than ever before,” says FOX. Meanwhile, factors such as retirement and staff transitions inevitably come into play.

On the supply side, the reports says many advisors are developing their infrastructure and marketing plans to collaborate with family offices, as they view these business as a source of future revenue growth.