Family offices search for alternative diversifiers as strategic shift gains momentum

Zurich/London, 8 June 2022 – UBS, the world’s leading wealth manager, today announced the launch of the Global Family Office Report 2022, which surveys 221 single family offices around the world. The report is the largest and most comprehensive of its kind, with the family offices surveyed averaging a total net worth of USD 2.2 billion.

Shift from fixed income to alternative diversifiers

The report shows that family offices globally are in a new era of strategic asset allocation (“SAA”) as high inflation, central bank liquidity and rising interest rates compel them to review their investment options. They are reducing fixed income allocations and increasing investments in private equity, real estate, and private debt, sacrificing liquidity for returns. Forty-two percent plan to increase direct private equity allocations, while 38% intend to raise investments in private equity funds and funds of funds. Real estate is favoured by 37%, while 27% are turning to private debt.

A third (32%) of the average family office portfolio was allocated to equities in 2021, 15% to fixed income, 12% to real estate and 2% to private debt. Private equity has continued its steady rise, from a 16% average allocation in 2019 (including funds and direct investments) to 21% in 2021.

Looking to the future, family offices are exploring incremental shifts in SAA, venturing further into the private markets they have been investing in during recent years. Over the next five years, 29% plan to decrease investments significantly or moderately in developed market fixed income.

“Family offices are keeping pace with a period of substantial transformation. In response to the COVID-19 pandemic, digital disruption and now a war in Ukraine, they are reviewing their options with greater urgency, as a strategic shift towards additional sources of return and alternative diversifiers gains ground,” said Joe Stadler, Executive Vice Chairman at UBS Global Wealth Management. “Against challenging market conditions, family offices see the bigger picture and are applying prudence and innovation to their strategic asset allocation.”

Private equity a favoured source of return

Private equity’s broad opportunity and potential to produce higher returns is popular among family offices globally. Eighty percent of family offices report investing in private equity, which stands out as the only asset class where the number of family offices making allocations has risen steadily year after year. This is up from 77% in 2021 and 75% in 2020.

Private equity is a core risk asset across global regions. Ninety-six percent of family offices in the US invest, with family offices in Switzerland not far behind, at 86%. Eighty-three percent and 79% of family offices in the Middle East and Asia Pacific invest in private equity respectively. Even in Western Europe and Latin America, where private equity investment lags, participation is high at 73% and 76% respectively.

Seeking out active strategies as uncorrelated returns become harder to find

In a departure from recent years, the report shows that family offices are also seeking out more active strategies. Half (50%) are either relying more on active strategies and manager selection or considering doing so. According to 41% of family offices, they’re also looking to illiquid assets.

Almost three quarters (71%) of family offices say it’s hard to find uncorrelated returns in the current environment. Reflecting low bond yields, almost two thirds (63%) say they no longer think high-quality fixed income helps diversification. Just under a quarter (23%) of family offices use hedge funds to diversify or are considering doing so. As the search for alternative diversifiers intensifies, a third (33%) of family offices think they’re no longer able to build a complete portfolio with long-only investments.

Investing in technology and digital transformation

Eighty-four percent of family offices globally say that digital transformation is the investment theme that resonates most with them. This spans across e-commerce, data, artificial intelligence, the cloud and blockchain. Turning their attention to digital assets and distributed ledger technology (“DLT”), a third (35%) of family offices either invested in DLT or considered doing so in 2021. A quarter (26%) were investing in cryptocurrencies or considering it.

However, many family offices are investing in digital assets and distributed ledger technology to learn rather than earn. Aware of the disruptive potential of blockchain, they are keen to understand the technology and its business applications. More than two thirds (69%) say they are investing because they believe decentralized payments and technologies will be widely used. Similarly, over half (53%) of those investing in cryptocurrencies, or considering doing so, want to learn about the technology. That compares with just under half (49%) who are doing so for purely financial reasons.

Notes to Editors

About the UBS Global Family Office Report
This is the third iteration of the UBS Global Family Office Report. UBS Evidence Lab surveyed 221 UBS clients globally between January 19 and February 20, 2022. Participants were invited using an online methodology and were distributed across more than 30 markets worldwide. In 2021, UBS surveyed 191 UBS clients across 30 markets.

About UBS
UBS provides financial advice and solutions to wealthy, institutional and corporate clients worldwide, as well as private clients in Switzerland. UBS's strategy is centered on our leading global wealth management business and our premier universal bank in Switzerland, enhanced by Asset Management and the Investment Bank. The bank focuses on businesses that have a strong competitive position in their targeted markets, are capital efficient, and have an attractive long-term structural growth or profitability outlook.

UBS is present in all major financial centers worldwide. It has offices in more than 50 regions and locations, with about 30% of its employees working in the Americas, 30% in Switzerland, 19% in the rest of Europe, the Middle East and Africa and 21% in Asia Pacific. UBS Group AG employs more than 72,000 people around the world. Its shares are listed on the SIX Swiss Exchange and the New York Stock Exchange (NYSE).