Future Returns: Single-Family Offices Turning More to Private Markets

Single-family offices across the world are moving deeper into private markets in response to higher inflation, rising interest rates, and central banks scaling back their market support, a UBS Global Wealth Management report revealed earlier this month.

Among 221 family offices surveyed—with an average total wealth of US$2.2 billion—many are planning to shift their strategic asset allocations to further emphasize private equity, real estate, and private debt. A strategic asset allocation reflects an investor’s long-term approach.

“Most family offices are looking at all of this with the viewpoint that No. 1, inflation will at some point come down, but will be at a higher level than we had prior to Covid; No. 2, that [central bank] policy rates, as we all know, are moving higher, but in real terms, probably won’t reach a very high level given the high indebtedness post Covid; and No. 3, that growth is coming down but it’s not crashing,” says
Max Kunkel,
chief investment officer for the wealth management’s Global Family and Institutional Wealth division. 

Given this view, family offices have to consider “what is the asset allocation that is likely going to help me in achieving my overarching goal—which is growing wealth in real terms with the lowest possible volatility,” Kunkel says. 

Unlike many investors, these wealthy families, all of whom are UBS clients, can lock up their capital for several years without concern, allowing them to reap higher returns than if their money was invested in liquid public markets.

Penta recently spoke with Kunkel and
Josef Stadler,
executive vice chairman at UBS Global Wealth Management, about this shift into private markets by some of the world’s wealthiest investors. 

Moving Away From Public Bonds 

The jump in inflation rates globally is prompting family offices to consider the role of bonds and cash in their portfolios, the survey found. Some have cut back on public fixed income for years because of low yields, and the prospects…

Read complete post here:
Source link