Report: Richest Families Increase Private Investments Allocation Favoring Return Potential over Liquidity
The annual UBS Global Family Office Report provides insights from their family office clients around the globe. The recently released 2022 report, which provides insights on how billionaire investors are allocating capital includes data from 221 single family offices with an average AUM of $2.2 billion.
Key takeaways from the report include:
· Private Equity Investments Gain Popularity
Globally, eighty percent of family offices now invest in private equity, up from 77% and 75% in 2021 and 2020, respectively, Private equity was the only asset class attracting year-on-year increases. Private equity is a core risk asset across global all global regions. Ninety six percent of U.S. family offices in the US invest in private equity, vs eighty percent of all family offices overall. The average family office portfolio allocated 21 percent to private equity, up from 16% in 2019. Forty two percent of family offices surveyed were planning to increase allocations to private equity, vs. 37% to real estate and 27% to private debt. The report anticipates the trend toward private investments would continue for at least the next five years.
· Shifting from Fixed Income to Alternatives
The economic challenges of high inflation, central bank liquidity and rising interest rates are causing family offices to rethink their investment options. They are reducing fixed income allocations in favor of investments in private equity, real estate, and private debt, a transaction that favors return over liquidity.
· Technology Dominates the Private Equity Deal Pipeline
Technology and digital transformation are the most common investment themes family offices target for private equity investments, including automation and robotics, e-commerce, data, artificial intelligence, the cloud and blockchain.
Family offices tend to focus on areas in which they can add the most value, including strategic asset allocation, risk management, financial accounting, and reporting.