SUMMARY
Following the public equities upside in 2023, family offices are shifting their portfolios from cash to risk assets with the expectation of portfolio gains in the coming year.
Citi Private Bank’s Global Family Office Group today released the results of its 2024 Family Office Survey, offering a rare glimpse into the thinking and behaviors of some of the world’s most sophisticated investors: its family office clients. Amid ongoing market volatility and geopolitical challenges, the report outlines key challenges and areas of potential opportunities for the year ahead.
The survey, which is distributed annually to all of Citi’s global family office clients, captures the investment sentiment, portfolio positioning, family governance and best practices of family office clients in 2024. It received a record number of respondents this year, making it the most global and comprehensive survey of its kind.
Key themes to emerge from this year’s survey include:
- Asset preservation and preparing the next generation for future responsibilities are families’ top concerns. Meeting family members’ expectations is regarded as the top challenge.
- Family offices are putting their cash to work by making significant portfolio shifts from liquid resources to fixed income, public and private equity.
- Continued optimism among family offices around the outlook for portfolio performance over the next twelve months, with 97% of respondents expecting positive returns.
- The future path of interest rates is the top concern followed by geopolitical issues – such as US-China relations and the conflict in the Middle East.
- Investment approaches are becoming more sophisticated with 60% of family offices having built a CIO-led investment team, investment committees and investment policy statements, and a strong commitment to alternative asset classes.
- Family Offices are growing their portfolio exposure to artificial intelligence – which likely contributed to strong returns over the last year. However, the adoption of this technology into family office operations is lagging.
- As family offices professionalize, they are increasingly collaborating with external partners – investment management (54%) and reporting (62%) are the only two services provided internally by most family offices, with all others performed externally or jointly.
“We are thrilled to share this year’s survey findings, which offer an inside look into the investments and priorities of some of the world’s most diverse and sophisticated family offices,” says Hannes Hofmann, Head of the Global Family Office Group at Citi Private Bank. “In the last two years, we have seen the number of respondents grow from 126 to 338 across the globe, indicating an increased need for the unique insights into the top challenges and opportunities family offices face today. The wide-ranging questions cover the most topical global issues, revealing important shifts in the concerns and interests of respondents. We look forward to continuing our close partnership with family offices to provide access to all areas of Citi that support the ambitious goals and needs of the world’s most global and sophisticated investors.”
For the first time since 2021, inflation was not respondents’ top near-term worry related to the economy and financial markets. Rather, the outlook for interest rates was top of mind for more than half of respondents, followed by US-China relations and market overvaluation. Concerns about the conflict in the Middle East are also more prominent now than those surrounding the Russia-Ukraine war.
For the year ahead, sentiment around the outlook for asset classes was more positive among respondents compared to last year’s survey findings, with the most confidence in direct private equity, private equity via funds and global developed equities. Compared to the 2023 report, positivity toward global developed investment grade fixed income decreased from 45% to 34%, which may reflect the uptick seen in risk-seeking appetite. In regard to portfolio returns, respondents were nearly unanimous (97%) in the expectation for positive returns, almost half of respondents anticipating returns above 10%.
The 2024 Global Family Office Survey Insights Report also revealed a shift in portfolio allocations. Public equities and fixed income saw their weightings rise from 22% to 28% and 16% to 18%, respectively. Private equity also dipped from 22% to 17%, which may have been accentuated by valuations taking longer to adjust upward compared to those of public equities. North America received the highest overall weighted allocations (60%) followed by Europe (16%) and Asia Pacific excluding China (12%). Allocations to China had almost halved to 5% from 8% since last year due to the country’s ongoing economic challenges and market unease. North America’s share of allocations was up from 57%, buoyed by a strong equity market.
“Our family office clients are increasingly becoming more global as they seek to create and preserve wealth amidst new market challenges and opportunities,” says Ida Liu, Head of Citi Private Bank. “As interest rates evolve and geopolitical challenges persist, ultra-high net worth investors and their families are putting cash to work and shifting their portfolios toward public and private equity. Family offices are focused on the future as they navigate evolving markets worldwide.”
Results show that asset value preservation was the main concern for families, followed closely by preparing the next generation to be responsible owners of their wealth. This underscores the dual priorities of family principals who seek to prepare wealth for their families and to prepare their family members to be stewards of that wealth. Furthermore, the adoption of formal governance systems is unequally distributed within family enterprises. While more than two thirds of families’ governance systems in place for the investment function, less than half report relying on formal governance for other family office affairs and the family itself.
“While family offices are innately unique, our survey demonstrates that there are many commonalities around their concerns and behaviors,” explains Alexandre Monnier, Family Office Advisory Head, Global Family Office Group. “Findings like these unveil the new ways family offices are managing their wealth – through portfolio diversification and sophisticated investment approaches – and preparing families to achieve both financial and family wellbeing.”
This year’s survey was initiated during Citi Private Bank’s ninth annual Family Office Leadership Program held in June 2024. The survey was subsequently released to Citi Private Bank’s global family office clients for input, with 50 questions aimed to capture the investment sentiment, portfolio positioning, family governance and best practices of family office clients. It drew responses from 338 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.
