While North America has historically seen the largest regional allocations from family offices, research from UBS reveals Asia-Pacific is coming up as an attractive investment destination.
Surveying over 300 family offices across seven regions of the world, UBS’ latest Global Family Office Report found more than a third (35 per cent) are seeking to increase allocations to the Asia-Pacific over the next five years, trailing just behind North America (38 per cent).
This comes amid a strong home bias in allocations, with almost half of APAC family offices planning to allocate more assets to APAC over the next five years, while European and Swiss family offices have typically demonstrated a stronger affinity towards Western Europe.
Historically, family offices have been strong believers in American exceptionalism, UBS explained, with US tech companies at the forefront of the generative AI revolution while maintaining a sizeable share of global equity markets.
“Family offices, on average, have half (50 per cent) of their portfolios invested in North American asset classes, building on a multi-year theme of increasing their investments in a region that has proved resilient to high policy rates and geopolitical risks, while offering the prospect of relieving global labour shortages through AI’s anticipated productivity gains,” the report explained.
Meanwhile, just over a quarter (27 per cent) of allocations have been in Western Europe, with a particular focus on sectors such as luxury goods and automation.
However, over the next five years, UBS found confidence in North America and the Asia-Pacific (excluding Greater China) is “enduring”.
Looking at asset allocations, the 2024 survey found family offices returned to a greater balance between bonds and equities. Globally, family offices’ allocations to developed market bonds have increased by the largest amount seen in five years.
On average, they allocated 16 per cent to developed market bonds in 2023, up from just 12 per cent in 2022, and plan to maintain this level in 2024.
Meanwhile, they allocated around 24 per cent to developed market equities in 2023, a slight decline from 25 per cent in 2022, and plan to lift this to around 26 per cent in 2024.
The survey also reported a significant change in allocations to real estate. Globally, family offices’ average allocations to real estate dropped to 10 per cent in 2023, compared to 13 per cent in 2022, driven by uncertainty around valuations and the growing appeal of fixed income assets.
In 2024, UBS predicts this will recover slightly, with the average allocation said to increase to 12 per cent.
Unsurprisingly, it found allocations to cash are set to fall slightly in 2024, as central banks in the US and Europe signal rate cuts. While average allocations held steady at 10 per cent in 2023, family offices plan to reduce them to 9 per cent in 2024.
Looking more closely at APAC family offices and their plans over the next five years, UBS said family offices plan to increase allocations in a range of asset classes.
Almost half (46 per cent) of family offices anticipate raising their developed market equity allocations in the next five years, while more than a third (39 per cent) plan to add to direct private equity investments, and a similar proportion (34 per cent) to funds/funds of funds. At the same time, over a third (35 per cent) intend to add to developed markets fixed income.
Commenting on this, LH Koh, head of UBS Global Family and Institutional Wealth APAC, said: “Private equity and hedge funds continue to be the favourites among family offices to keep their portfolios well-diversified and achieve better investment returns.”
Moreover, when it comes to making a positive impact, healthcare was highlighted as the top-rated sustainability theme among APAC family offices.
