“At a time of increased volatility, global recession fears and following a near unprecedented market selloff in early April, our latest report serves as a good reminder that family offices around the world are first and foremost pursuing a steady, long-term approach, as they focus on preserving wealth across the next generations,” said Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management. “Even with the survey largely conducted in the first quarter, family offices were already acutely aware of the challenges posed by a global trade war, identifying it as the year’s greatest risk. Yet in interviews conducted following the market turmoil that erupted in early April, they reiterated their diversified, all-weather strategic asset allocation.”

For 70% of family offices, the top threat to their investments is a trade war. The second biggest concern for more than half (52%), was major geopolitical conflict, followed by higher inflation.

So how can the risk be mitigated? Thirty-eight percent highlighted the difficulty of finding the right risk-offset strategy when managing portfolio risks, whilst 29% pointed out the unpredictability of safety assets due to factors such as unstable correlations, said the UBS Global Family Office Report.

Forty percent of respondents consider that relying more on manager selection and/or active management is an effective way to improve portfolio diversification, followed by hedge funds (31%). Almost as many family offices are increasing their holdings of illiquid assets (27%) and more than a quarter (26%) use high-quality, short-duration fixed income. Precious metals, used by almost a fifth (19%) of respondents globally, saw the biggest year-on-year growth, with 21% planning a significant or moderate increase in their allocation over the next five years.

Some family offices are lifting their weightings in developed market equities and bonds as they seek liquid opportunities for capital growth and returns in a volatile environment, said UBS. As a result, there are opportunities to invest in growth trends in public equities that were mostly restricted to private equity a few years ago, with solutions ranging from generative artificial intelligence stocks to energy, resources and longevity (longer life expectancy) stocks.

In Europe, excluding Switzerland, family offices mainly hold equities (30%), bonds (15%) and cash (6%). They are most familiar with emerging technologies like electrification of mobility (cited by 73%), healthcare and/or medicine (70%) and the energy transition (70%).

More than one in two family offices has already put an estate plan for family members in place, whilst 29% of beneficial owners believe they still have time to do so ahead of them. The biggest challenge remains ensuring that assets are transferred in the most tax-efficient way possible, say almost two-thirds of those surveyed (64%). More than four out of ten respondents (43%) consider that preparing the next generation to take responsibility for wealth management, in line with the family’s objectives, is a major challenge. Only 26% consult the next generation about the succession plan from the outset.

This article was originally published in French.