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The race to the bottom on low cost, benchmark aware solutions for a post-YFYS world has pretty much been run. But while the perception of value currently sits on price, that might not be where it ends up, according to Fidelity’s Simon Glazier.
Family offices go global, chase higher alts allocations
Family offices are becoming more professional, moving up the risk spectrum and growing their global footprint as they build increasingly sophisticated and diverse investment portfolios, according to a new study by Ocorian, a global provider of trust, administration and fiduciary services.
The study of 300 family office professionals managing a collective $155 billion of assets found that 85 per cent think their family office has become more professional in its operations and structure, with improvements across succession planning and investment management and through strengthening or introducing a family constitution.
“It is extremely positive that so many family offices have taken significant steps in becoming more professional over the last five years,” said Michael Harman, commercial director for private clients at Ocorian. “I’d suggest this rapid and widespread professionalisation is a result of the explosion of growth in number of family offices; they simply have to professionalise as a way to stand out in an increasingly crowded market. Despite this rapid increase in sophistication, they face a number of significant challenges in the near future – particularly around regulation and compliance.”
That uplift in professionalism comes as family offices become increasingly complex organisations, opening offices in different jurisdictions to match the itinerant travel and living arrangements of family members as well as to reduce the risk posed to them by geopolitical issues like changes in government or wars. But that growing global footprint is also necessary to support increasingly diverse and sophisticated investment portfolios, matching the experience of many much larger institutional investors that have opened overseas outposts.
But many family offices are still grappling with governance, with 86 per cent citing the need to have the right governance model in place to meet the needs and expectations of family members as a key challenge, and 59.2 per cent fretting the need to ensure investments are properly properly aligned with their risk/return profile.
Enticed by their outsized performance and diversification benefits, family offices are also increasing their allocation to alternative investments, with the majority pursuing them through a fund structure. Families’ next generations are also prioritising investments in digital assets (65.5 per cent) and ESG and impact investing (42.2 per cent).
Investment risk appetite is increasing, though not just for macroeconomic reasons or out of a belief that markets might have bottomed. There is now more regulation (and more transparency) around riskier and more specialist classes, though just over a quarter of respondents said that family offices have also had “too much of their wealth in cash for too long” and half believe that inflation has peaked or will soon, justifying allocations to riskier assets.
