Family offices, which serve as private investment institutions for ultra-wealthy families, are undergoing a transformative shift in investment strategies. According to the latest insights from the 2024 Global Family Office Survey by Citi Private Bank, optimism is palpable among these entities, suggesting an aggressive pivot from conservative cash hoarding to dynamic investment in equities and alternative assets. The survey highlights a resurgence in risk appetite, reflecting broader macroeconomic trends, including expectations of interest rate cuts by the Federal Reserve.
The survey reveals strikingly high optimism among family offices, with a staggering 97% of respondents anticipating positive investment returns in the upcoming year. Noteworthy is that nearly half of these investors predict double-digit gains. Hannes Hofmann, head of the family office group at Citi, emphasizes that “this is the most optimistic outlook we’ve seen” during the five years of the survey’s history. This shift marks a clear departure from the past two years, where many family offices adopted a defensive posture in anticipation of a looming recession.
This renewed confidence prompts family offices to act on favorable market conditions. The inclination toward riskier assets is evident, as many investors indicate plans to fortify their positions in private equity—a category leading the charge for growth. The survey shows that 47% of family offices intend to bolster their allocations in direct private equity, underscoring a substantial pivot in investment behavior.
Family offices appear eager to broaden their horizons, moving capital away from cash reserves and into a diversified array of asset classes. The survey indicates a significant interest in developed-market equities, particularly those in the United States, with 39% expressing intentions to increase their investments in this area. This trend reflects a rising confidence in stock market rebounds, especially as the S&P 500 has achieved notable gains this year.
Moreover, fixed income has re-emerged as a favored asset class, with half of the surveyed offices increasing their fixed-income holdings last year. The decline in interest rates has rejuvenated interest in bonds, with many family offices planning further investments in this category. While public equity remains a major component—constituting 28% of typical portfolios—there’s a clear shift toward embracing a more risk-on investment strategy.
A characteristic feature distinguishing family offices from traditional investors is their growing affinity for alternative investments. The increasing allocation to private equity, venture capital, hedge funds, and real estate now represents a significant 40% of their portfolios. This trend illustrates not only a commitment to long-term asset allocation strategies but also highlights the sophisticated, forward-thinking approach family offices adopt.
AI emerges as a compelling theme in this space, with prominent family offices, including those of billionaire investors like Jeff Bezos and Bernard Arnault, committing substantial resources to AI startups. The survey notes that over half of family offices have integrated AI into their portfolios, either through direct investments or funds focused on technology. The enthusiasm for AI starkly contrasts with the more cautious approach many have taken towards cryptocurrencies, indicating a clear distinction in perceived viability between the two domains.
Despite the prevailing optimism, challenges loom on the horizon. When family offices were queried about their concerns regarding the economic landscape, their top unease surfaced around the trajectory of interest rates. Additionally, concerns regarding U.S.-China relations and market overvaluation rank high on the list, reflecting a cautious realization that geopolitical and financial turbulence could derail optimistic forecasts.
This year marks a notable shift as inflation, which dominated concerns in previous years, is no longer seen as the primary threat. While the appetite for investment is evident, family offices must navigate these uncertainties with prudence.
As family offices recalibrate their investment strategies amid shifting economic dynamics, the shift toward equities and alternatives signifies a transformative moment. With increased allocations to private equity, an eagerness for AI investments, and a willingness to embrace a more aggressive stance, family offices are not merely reacting to market changes; they are actively shaping new narratives around wealth management and investment in the modern era. Whether this trend sustains remains to be seen, but the insights from the survey demonstrate that family offices are ready to adapt to the complexities of the financial landscape, all while striving for growth and innovation.