The wealthiest families in Europe suffered the lowest investment returns in five years as they held high cash and property exposure, which puts more pressure on them to preserve wealth rather than create it in the foreseeable future, research from Campden Wealth shows.
In a report, Back to Business – Family Offices Adapt to the New Normal, it found that average annual returns were a relatively meagre 3.6 per cent among single family offices and 2 per cent for multi-family offices for the 12 months to the middle of 2012.
Campden Wealth’s report, now in its fifth year, surveyed a total of 60 SFOs and MFOs, each managing assets worth between €50 million ($65 million) and €1.5 billion.
As the financial crisis took hold, SFOs moved out of equities and bonds into more direct and physical assets such as cash and commodities. These organisations also boosted exposure to such “real assets” as farms, forests, art collections and antiques. With multi-family offices, their asset allocation to emerging markets rose to 20 per cent in 2012 from 14 per cent a year earlier. Despite recently disappointing returns, some family offices report a tendency for increased allocations to higher-risk asset classes in the next three years, the report said.
One UK-based SFO said in the survey: “We’ve not performed as well as we would like or need to sustain our growing family’s needs. When we conducted an analysis of our investment style we found that we had broken some of the fundamental principles of investing that have serviced the family very well over the years – this hasn’t delivered the right results. We are shifting our style back to what works best.”