Family office investments improve in 2016
Other - SEPTEMBER 15, 2017

Family office investments improve in 2016

by Andrea Waitrovich

The number of family offices interested in sustainable investing has grown substantially, with 40 percent set to ramp up allocation toward sustainable or impact investments, which seek to deliver outsized returns and remedy environmental and social ills, according to UBS, the Switzerland-based financial services firm, and Campden Wealth Research, an information provider.

Sustainable investment products, which aim to deliver outsized returns and remedy societal and environmental ills, have grown at a rate of more than 33 percent between 2014 and 2016 in the United States, according to data from the U.S. SIF Foundation cited in a report by Morgan Stanley. The market for such products, as a result, has grown from $6.57 trillion to $8.72 trillion.

According to UBS’ Global Family Office Report, which is based on a survey of senior staff from over 260 family offices across the world, family offices are paying more attention to how they can make money for their clients and tackle issues such as poverty and global warming.

Each survey respondent, on average, works for a firm that manages a little under $1 billion.

Millennials are the main catalyst for increase in interest, according to the report. With millennials set to benefit from the largest intergenerational wealth shift in history in the coming years, family offices are starting to tailor their investments based on their preferences.

Around seven out of 10 family offices expect to undertake a wealth transfer between generations within the next 15 years, a period when tens of billions will pass from older to younger family members. But just under a third has a written succession plan in place to ensure this process occurs smoothly. A sixth of the family offices surveyed by UBS had no plan at all for dealing with intergenerational transfers of wealth.

The UBS research also examined the investment performance posted by family offices. A composite global portfolio of family offices returned 7 percent in 2016, up from 0.3 percent in 2015.

Exchange-listed and private equity investments now represent 47 percent of the average family office’s investment portfolio. UBS expects the equity side of family office portfolios to grow as interest in emerging market stocks, private equity funds and co-investments increase.

According to the report, family office clients are also focusing on their philanthropic works, with nearly 95 percent of the respondents planning to increase their giving over the next 12 months.

The research report also found that about one in 10 family office CEO and CIO roles are held by women. Women accounted for just 8 percent of the CEOs and 13 percent of the CIOs in the 262 family offices analyzed in the report. Women occupied only one-third of the COO and CFO positions.

While many of the respondents are developing a succession plan or have a verbal agreement in place, nearly half, 45.7 percent, have not yet established a succession plan.


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