Family Offices are known to be very discreet and don’t often share much about their inner workings in the public sphere. However there are a few reports throughout the year that reveal what’s happening in the family office space and the rising and falling trends. One such report is the UBS Global Family Office Report in partnership with Campden Wealth. For this year’s report, released last week, Campden Research surveyed the executives of 360 family offices across the world, with an average of $917 million assets under management.
The report revealed some useful information about how investment portfolios have been performing over the last 12 months and what family offices are focusing on and preparing for. This week I’ve pulled together some of the key trends the report highlights and those I found most interesting.
Assets to Cash
One of the key findings of this year’s report was that it revealed more than half of respondents believe that a market downturn will occur by 2020. As a result, 45% of family offices are preparing by reviewing their investment strategies and taking measures to minimise potential losses.
42% also said that in order to be in a position to capitalise on opportunistic investments they are increasing their cash reserves. Increasing reserves of cash and gold is a common strategy that many investors take in times of economic downturn but it should be noted that those with a long term investment view may still be able to ride out short and medium term volatility. Families with large cash balances also need to be aware that some banks are planning to charge negative interest rates. For example, UBS Switzerland will from November charge 0.75% a year on individual cash balances above CHF 2m (£1.6m). Credit Suisse is expected to follow suit.
The report also indicated that sustainable and impact investing is no longer seen as a ‘side project’ or something only focused on by the next generation of principles. It’s becoming a priority. In fact 33% of family offices currently dedicate between 10%-49% of their portfolios to sustainable investments. This trend is expected to keep growing with 85% of all sustainable investments meeting or exceeding investors’ expectations in the past year.
While globalisation and technology have made remote working possible for many years now, this year seems to be the year that remote working has really been embraced. One family office principle quoted in the report said that he and his staff only went in to the physical office one or two days a week with the rest spent working remotely. Anecdotally, I’ve also noticed a shift in colleagues in the family office and wealth sphere spending less time in a physical office, beyond the usual Friday.
A final revelation from the report I thought worth including, that family offices are spending more on professional services including support for succession planning, new business areas, security, governance and asset management. Family Offices’ total average spend on services in 2019 was $11.8 million and while this is not necessarily radical, it is interesting to know that not everything is being done in-house. I posit that there are two main reasons that family offices outsource. First, on the basis that it reduces costs and allows greater control. Second, that outsourcing may be done out of necessity. A World Economic Forum report revealed that nearly one-third of family offices lack in-house expertise. Particularly for small family offices that run with only a handful of staff, finding talent with the multiple and varied skills necessary to carry out all the functions of a family office is becoming increasingly difficult.