In May 2023, Goldman Sachs dropped a smokin’ fresh report on 166 family offices across Asia, Europe, and the Americas — and how they invest.
Last month, we shared how $20M+ entrepreneurs invest their money. Many of you gave feedback that this was your favorite edition. ⭐
This week, let’s take an inside look at how family offices invest their generational wealth. 👑
Today in 10 minutes or less, you’ll learn:
- 👨👩👧👦 Who are family offices (and why they’re different)
- 📊 Family office asset allocation in Q1 2023
- 🏦 Expected investments in the next 12 months
- 💡 Lessons and takeaways
Thanks to Varun Dutt for dropping in our laps this fascinating family office report.
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👨👩👧👦 Family offices: Asset allocation of ultra-high-net-worth families
🤔 What are family offices?
Family offices are private wealth management companies that serve 1 or multiple ultra-high-net-worth families.
👯Who were the family offices surveyed?
- Wealth: 70%+ of respondents have a net worth of $1B+
- Geography: 57% Americas, 21% EMEA, 22% APAC
- Active vs passive: 90%+ have in-house investment management capabilities
🐯 How family offices and Tiger 21 ultra-high-net-worth entrepreneurs are different
Tiger 21 members are generally newer in their wealth preservation journey. They may or may not have family offices.
Family offices are likely to have more assets, multi-generational timelines, full-time investment staff, and greater due diligence skills.
📊 Family office asset allocation in Jan/Feb 2023
Despite the hectic economy, family offices have been staying the course in 2023 vs 2021, with only minor tweaks:
📈 Public equity declined to 28%. This matches the behavior of the $20M+ entrepreneurs in Tiger 21
🏘️ Alternatives stayed constant at 44%, lower than 56% for the Tiger 21 cohort. What’s interesting is how Tiger 21 entrepreneurs allocated 2.5x more to real estate, and 20% more to private equity than family offices
💸 Cash and fixed income jumped from 19% to 22%. Goldman Sachs shared anecdotally this is due to avoid being forced to sell any investments and to act swiftly on timely opportunities
- ~2x higher cash allocation vs Tiger 21 cohort (10%). Family offices are possibly more keen on making new investments in the next 12 months
- APAC family offices held 38% cash & fixed income. 2.5x higher than EMEA and nearly 2x higher than Americas family offices. I was taken aback by how high this was!
🏦 What do family offices expect to invest in the next 12 months?
35% of family offices said they plan to decrease their cash allocation, signaling they’re gearing up for making new investments.
Top 3 investment areas
- 📈 Public equity: 48% expect to increase
- 💼 Private equity: 41% expect to increase
- 💸 Fixed income: 39% expect to increase, 56% for APAC family offices (DM me if you know why!)
- 🖼️ Collectibles are popular: 38% of family offices invest in things like art, wine, and aircraft. Top reasons why: passion (71%), diversification (39%), and having “trophies” (19%).
- 🪙 Crypto has lost favor: 62% report being not invested and not interested in crypto in the future, much higher than 39% in 2021.
💡 Lessons and takeaways
- Recession, geopolitics, and inflation are the top 3 concerns for family offices going in the next 2 years.
- 42% of don’t utilize leverage. Anecdotally, Goldman Sachs heard that family offices maintain cash balances to cover potential capital calls
- Most family offices invest in each of these asset classes through a manager. Except for private real estate, where they prefer to invest directly.
- 63% around the world chose to invest in the US vs other developed markets, China, India, and emerging markets.
- 73% of APAC family offices had geopolitical concerns. Many APAC family offices expressed intent to increase their US investments to regionally diversify due to concerns of tensions between China vs Western countries.
🌐 Beyond your borders
🇸🇬 Singapore property investment volume plunged 63%+ in Q1 2023 (ST)
🇨🇴 Colombia started offering a digital nomad visa, allows for up to 2 year stay (CNBC)
🇺🇸 Meta makes its final round of global layoffs — that’s ~5k impacted in May. Yikes (WP)
🗳️ Overseas ballot
Here are the results from last week’s poll:
Do you travel internationally for business?
• 33% Yes, 1 trip per month ✈️
• 16% Yes, 2-4 trips per month 🌎
• 0% Yes, 5+ trips per month 🧳
• 50% No, I work locally 🧑💼
Looks like half of y’all are business globetrotters!
Here is this week’s poll:
That’s all for today!
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