A certain amount of risk it's not as scary as it once was ei family office show that for the next 12 months there is a greater propensity to reduce liquidity held for a long time, instead investing it in equities, and to a lesser extent, in fixed income.
These are data that emerge from the second Report Family Office Investment Insights, "Eyes on the Horizon", conducted by Goldman Sachs, January 17 to February 23, 2023. We surveyed 166 institutional family office decision makers who have net worth of at least $500 million (93%), 72 percent of whom have net worth of at least $1 billion . 57% of them are located in the Americas, 21% in the EMEA area and 22% in the APAC area.
“Many institutional family offices do not intend to continue betting on cash in 2023. In view of the next 12 months, the interviewees proved themselves instead prone to risk, increasing in particular the allocations in listed and unlisted shares, adding only moderately to fixed income exposure to capture the opportunities offered by higher interest rates,” the report said.
He proved to be of a different opinion Andrea Ghidoni, General Manager of Intesa Sanpaolo Private Banking according to which "In 2023 the wealthiest families reduced their exposure to equities and turned more to the bond market where there are yields not seen for ten years".
Looking for more attractive yields
“Family offices have maintained a broadly homogenous approach to allocation more aggressive in order to obtain higher yieldssaid Meena Flynn, Co-Head of Global Private Wealth Management and Co-Lead of One Goldman Sachs Family Office Initiative. "The planned risk-on allocations tell us that respondents see excellent opportunities to obtain additional alpha, which is beneficial for the management and preservation of family assets."
Institutional family offices “have become key players in the public and private markets and have complex and specific needs. At Goldman Sachs, our approach is to put these clients at the center of everything we do,” said Kim Posnett, Head of Global Technology, Media and Telecommunications (TMT) Investment Banking at Goldman Sachs and Co-Head of One Goldman Sachs.
Asset allocation in the first part of 2023
Family offices continue to maintain strong risk asset allocations, with 28% turning to thepublic shareholding and 26% in private equity, while only 12 pct in cash and 10% in fixed income, with a greater focus on the information technology and health care sectors, which have the potential to face economic cycles and to generate value in the long term.
More propensity to risk in the next 12 months
A significant portion of respondents, 35%, said they are reducing the cash portion of their portfolio to move to slightly riskier assets. In particular, a substantial percentage of family offices said they would increase their allocations during 2023: 48% of respondents in public market equities, 41% in private equity, 39% in fixed income, 30% in private credit and 27% in private real estate and infrastructure.
The alternative asset investment option
“Family offices continue to invest significantly in alternative tools, including private equity, private credit, infrastructure, real estate and hedge funds,” said Tony Pasquariello, Global Head of Hedge Fund Coverage and Co-Lead of One Goldman Sachs Family Office Initiative. “In an in-depth survey conducted in 2021, on average 45% of the portfolio was allocated to the alternatives sector. Despite the challenges of 2022, in our most recent survey this percentage remained almost unchanged (44%)”, an important benchmark for family offices thanks also to the higher potential returns.
Interest in real estate investment is growing
Il Real Estate residential proves to be interesting for family offices, with approx one third which means increase exposure to this fund over the next 12 months and with another 30% wanting to maintain their exposure. The real estate commercial, particularly offices and retail spaces, appears less interesting: Only 7% of family offices are looking to increase exposure to the office sector and 4% to the retail sector, while 12% and 10% respectively are looking to decrease exposure to these sectors.
Among the collectibles: art, wine and aircraft
Even the collectible items they are appreciated, given that 38% of family offices invest in this sector, above all out of passion (71% ), while 39% do so with a view to diversification and 19% love to surround themselves with "trophies". Art objects, wine e aircraft are the most popular categories of collectibles.
Although the private credit currently accounts for only a small fraction of most family offices' allocation, at just 3%, a sizable proportion of respondents (30%) said they plan to increase their allocation to this asset class over the next 12 months.
"Since the global financial crisis, banks have reduced their direct lending business and family offices are increasingly interested in filling this gap as private lenders," said Naison-Tarajano. "The private credit sector is proving even more attractive in the current environment, on the back of rising interest rates and the calm of traditional funding markets, such as high yield and synindicated loans."
Declining attention to the Crypto world
Unlike in 2021, more family offices have invested in cryptocurrency (26%, vs. 16%), but only 12% expressed potential future interest in the asset class, down from 45%. The extreme volatility of the cryptocurrency market recorded in the last year seems to have extinguished their interest, as 62% of respondents say they are not invested and not interested in cryptocurrencies in the future, compared to 39% in 2021.
Green investment pays off
Family offices align broadly with the interests of other investors in matters of sustainability, with 39% focusing (moderately to extremely) on sustainable strategies and 48% investing directly in companies with social and environmental impact. L'clean energy is the favorite theme, with 60% of family offices planning to invest capital in this area in the next year. Other areas of interest are the food sector and sustainable agriculture, together with accessible healthcare.
