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June 13, 2019updated 19 Jun 2019 10:41am

Private investment allocations on the rise by family offices

Family offices are increasing allocation to private investments, especially private equity and real estate, according to a survey by Family Office Exchange (FOX) that serves as a peer-to-peer network for affluent families.

The study surveyed family offices in the US and those based in Australia, Belgium, Canada, the Caribbean, Chile, Mexico, Saudi Arabia, Spain, and the UK.

According to the study, family offices allocate a third of their total portfolio to private equity and real assets.

Private equity was found to generate double digit returns in 2018. On the other hand, traditional asset classes were found to deliver low or negative returns.

At the same time, 88% of the 84% of families making direct investments were found to invest directly in real estate.

Notably, non-US families were found to generate higher returns compared to US families last year.

The study also revealed that 72% of the respondents use a combination of the traditional top down asset allocation approach with a bottom up method.

In terms of 2018 investment performance, nearly half of the respondents were either very satisfied or somewhat satisfied.

This was despite the fact that the average overall portfolio return was essentially zero.

Eleven percent of the respondents were very dissatisfied with their investment performance.

FOX managing director of the investor market Kristi Kuechler said: “Over a longer period of time, it is interesting to evaluate family offices’ performance relative to industry benchmarks, with family offices investing broadly across asset classes and along the liquidity spectrum.

“Even after a tough 2018, family office returns handily exceeded the strong five-year returns generated from a US-focused stock/bond portfolio.”

 

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