Several of the key themes to emerge from this year’s survey include:
- In a broad portfolio reassessment, family offices have raised allocations to fixed income and private equity, making bigger asset allocation changes more than in recent years.
- Continued focus on direct investments, with two thirds of family offices looking for value opportunities, whilst 38% have paused new direct investments due to economic uncertainty
- Rising portfolio values in the first half of 2023 have positively surprised to the upside; looking forward there is widespread optimism for investment returns in the year ahead
- More family offices are focusing on wealth and investment management due to the uncertain macro environment, with less time spent on family unity and continuity compared to previous years. But family offices are aware that they need to assist the integration of the next generation into managing family wealth
- A generational philanthropic transition is coming and family offices are working hard to reflect the giving philosophy and priorities of the rising generation
- There is a large yet narrowing gap between intention and action on sustainable investments
“We are excited to share this year’s survey findings, which reflect the needs and actions of some of the most diverse and sophisticated family offices around the world,” says Hannes Hofmann, Global Head of the Global Family Office Group at Citi Private Bank. “With 268 respondents, we believe this is the most comprehensive survey of its kind, offering unique insights into the global challenges and opportunities family offices face today. With two thirds of respondents from outside the US, we have the opportunity to compare findings between Asia, Europe, Latin and North America, as well as between family offices that serve first and second generation families, versus third, fourth and later generation. We look forward to working closely with our family office clients, to enable them to access all areas of Citi across wealth management, investment banking, commercial banking and custody and security services.”
The top concerns for family offices include inflation, interest rate increases, as well as geopolitical uncertainty amidst heightened US/China tensions. Amid rising asset prices in the first half of 2023, two thirds of respondents saw mark-to-market portfolio increases and nearly every respondent expects positive portfolio returns over the next 12 months. In an environment of rising financial markets, recession fears and multi-year high bond yields in 2023, many family offices reassessed their asset allocation more in recent years. Over half (51%) reported increasing fixed income allocations, 38% upped private equity allocations, while 38% cut public equity allocations.
The 2023 Global Family Office Survey Insights report also found that direct investing remains a strong focus for family offices, but while 66% of family offices surveyed said they were seeking opportunistic deals based on attractive valuations, 38% paused new direct investments due to economic uncertainty. Technology was the most popular sector for direct investment in every region apart from Latin America, where there was a preference for real estate (57% vs 43%). Another disparity was in attitudes toward healthcare, where 58% of family offices in Europe, the Middle East and Africa and 56% of family offices in Asia Pacific named the sector among their top three, compared to 26% in North America.
Furthermore, 74% of family offices report their primary focus has shifted toward wealth management and investment management (55%). This is well ahead of fostering family unity and continuity (21%), but this trend is less pronounced for third generation families, who recognize the need to manage critical issues alongside short-term imperatives. At the same time, the families themselves are focused on preparing for the future by preserving asset values (68%) and preparing the next generation as responsible wealth owners (60%). This is an opportunity for family offices to continue to help their principals address both family and financial concerns.
“Our family office clients are becoming more global and are facing new challenges and opportunities in managing and creating wealth,” says Ida Liu, Global Head of Citi Private Bank. “With inflation, market volatility and geopolitical concerns top of mind amongst ultra-high net worth investors and their families, they are readily diversifying their portfolios and considering direct and sustainable investments. It’s clear they are thinking beyond the now with an eye toward the future.”
The survey results also showed while family offices’ philanthropic focus has yet to adapt to reflect the priorities of the rising generation, families are increasingly aware that a generational philanthropic transition is coming. They are seeking support to engage the next generation with 38% of respondents planning philanthropic leadership succession and 34% planning to integrate philanthropy as part of their broader wealth planning strategy.
“This year’s expanded survey enables us to gain deeper insights into the widespread challenges family offices are facing and identify specific areas of opportunity to position them for the future,” says Alexandre Monnier, Global Head of Family Office Advisory. “Our survey shines a light on what family offices are prioritizing, how they are shifting their portfolios and the ways in which they manage their wealth to align with their financial goals.”
This year’s survey was initiated during Citi Private Bank’s eighth annual Family Office Leadership Program held in June 2023. The survey was subsequently released to Citi Private Bank’s global family office clients for input. The survey included over 40 questions aimed at gauging investment sentiment and portfolio actions of clients in the wake of ongoing geopolitical tensions, macroeconomic headwinds and market volatility in early 2023. It drew responses from 268 participants who were included in this report.
Citi Private Bank’s Global Family Office Group serves single family offices, private investment companies and private holding companies, including family-owned enterprises and foundations, around the world. We offer clients comprehensive private banking and family office advisory services, institutional access to global opportunities and connections to a community of like-minded peers.
Citi is a preeminent banking partner for institutions with cross-border needs, a global leader in wealth management and a valued personal bank in its home market of the United States. Citi does business in nearly 160 countries and jurisdictions, providing corporations, governments, investors, institutions, and individuals with a broad range of financial products and services.
· Additional information may be found at www.citigroup.com | Twitter: @Citi | LinkedIn: www.linkedin.com/company/citi | YouTube: www.youtube.com/citi | Facebook: www.facebook.com/citi