CHICAGO, July 26, 2022 (GLOBE NEWSWIRE) — Family Office Exchange (FOX), the leading global membership organization serving corporate families, family office professionals and wealth advisors, has completed its annual Global Investment Survey, focusing on the investment sentiments and activities of global family office CIOs during last year.
The results show that family investors are at a turning point. At the time of the survey, after two years of record returns, respondents faced the compounding threats of global geopolitical instability, rapidly rising inflation and the very real prospect of an economic recession over the coming year. As a result, 93% of respondents indicated that they expect high or extremely high market volatility in 2022. At the same time, 44% expect the economy to improve and 61% are positive about the markets in the coming year.
The allocation to direct private capital continues to increase
In 2021, venture families shifted funding out of cash and hedge funds and into private equity (PE), venture capital (VC) and direct investments – portfolio allocations to direct PE increased by 5 percentage points year over year. These asset classes are better equipped to serve the unique needs of multigenerational families. They are seen as attractive vehicles to provide incremental returns, diversify away from public markets and provide direct exposure to impact investing and opportunities to educate and engage family members of the rising generation.
Impact investing is slowing down
Despite continued interest in impact investing, family wealth owners appear to be slowing — even reducing — their allocation to the category, citing concerns about impact measurability, short data and insufficient education on the subject. Respondents identified the lack of clear and universally recognized metrics that define success for social impact investing as the main barrier preventing them from further engaging in impact investing. In addition, most family offices expect market-rate returns, which their impact investments may often not meet.
The transfer of investment expertise will continue to grow
The FOX study shows a significant disparity between smaller family offices – those with fewer than 7 employees – and larger ones in their propensity to hire PE or VC professionals in-house – only 13% of small offices have such professional expertise on staff compared to 59% of large offices. As family office allocations to individuals, primarily through direct investments, continue to grow, so do their needs for skilled professionals who source, evaluate, execute and manage direct PE and VC investments. Smaller family offices are more likely to rely on outside expertise to meet these needs. Also, given these limitations, they are more likely to rely on friends and family for deal flow and use real estate as their direct investment vehicle. At the same time, larger offices are more likely to invest in private equity directly and through allocations from funds, brokers and investment bankers they have access to.
Looking ahead to next year, business families and their family offices plan to overweight private equity (65% of respondents) and cash (44%), and underweight fixed income (68%). Large offices are much more aggressive in their plans to reallocate from fixed income to private equity, while small offices are more likely to park funds in cash. Almost all family offices expect their investments to at least match the performance of the markets over the next two years, and a third of respondents expect to beat the markets.
Family Office Exchange (FOX) was the first and continues to be the industry-leading membership organization that brings together the collective intelligence of nearly 500 multigenerational families, family office leaders and trusted advisors to build a community focused on the exchange of colleagues, continuous. learning and objective instruction. The community includes over 8,000 family leaders and sophisticated counselors in 25 countries who use FOX’s resources to counsel families each year. For more information about FOX, please email us at [email protected] or visit www.familyoffice.com.
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