Recent data reveals a promising outlook for family offices as they shift from periods of cash hoarding to more dynamic investment strategies. A new survey conducted by Citi Private Bank indicates that a staggering 97% of family offices are anticipating positive returns in the coming year, with nearly half forecasting double-digit gains. This represents a marked contrast to the cautious approach that characterized recent years, highlighting an increased willingness among these private investment entities to embrace risk as interest rates begin to decline.
Hannes Hofmann, who leads Citi Private Bank’s family office group, reiterated the growing risk appetite, stating, “This is the most optimistic outlook we’ve seen.” Such optimism is especially evident in their growing interest in alternative investments. Family offices, defined as the investment arms of affluent families, are indicating a robust shift toward both traditional equities and alternative assets like private equity, suggesting a renaissance in their investment philosophies.
The survey showcases an impending increase in allocations towards direct private equity, with 47% of family offices indicating plans to boost their investments in this category over the next year—an encouraging trend for private equity markets. Meanwhile, only a small fraction, about 11%, express intentions to decrease their holdings. Furthermore, family offices are also contemplating a move back into the stock market, particularly in developed markets, with 39% aiming to increase their equity allocations.
This focus on equities follows a previous year where 43% of family offices had already expanded their investments in public stocks. Currently, stocks represent 28% of their average investment portfolio, a significant increase from 22% in the prior year. This shift indicates a clear strategy to transition assets from cash reserves into more growth-oriented vehicles. “Family offices are taking money out of cash, and they’ve put money into public equities, private equity, direct investments, and also fixed income,” states Hofmann, suggesting a robust pivot toward risk-seeking investments.
Interestingly, fixed income instruments are also gaining traction in family office portfolios. With recent trends showing a decline in interest rates, 50% of the surveyed family offices confirmed that they bolstered their fixed-income holdings last year—the highest among all investment categories. As more family offices anticipate further allocations to fixed income this year, it becomes evident that such investments serve as a foundational pillar in balancing their increasingly risk-oriented strategies.
Adding to this optimism is the performance of the S&P 500, which has surged nearly 20% year-to-date, fueling anticipation for sustained robust returns as the year progresses. Among the wealthiest family offices, there is even more bullish sentiment, with over 10% of these entities aiming for returns exceeding 15%. But despite the optimism, family offices are not blind to potential risks within the marketplace.
While their confidence is palpable, family offices have acknowledged underlying concerns fundamental to the economic landscape. A significant number, over half, cite interest rate trajectories as a crucial worry. Additionally, geopolitical tensions—primarily the dynamic between the U.S. and China—rank as a prominent concern, alongside fears of market overvaluation. Notably, for the first time since 2021, inflation has shifted from the foremost worry among these investors, indicating a potentially more stable view of inflationary pressures moving forward.
This nuanced balancing act between optimism and caution reflects a sophistication common to family offices. Their willingness to explore a diverse array of investment options distinguishes them from regular individual investors, particularly their appetite for alternatives. Collectively, alternative investments such as private equity, venture capital, real estate, and hedge funds constitute about 40% of family office portfolios. This figure is likely to rise as these offices deepen their investments in private markets.
One of the most exciting themes that has emerged among family offices is investment in artificial intelligence (AI). The allure of AI demonstrates its distinction from other trends, such as cryptocurrency. High-profile family offices, including those of Jeff Bezos and Bernard Arnault, have already embarked on investments in AI startups. The consensus from the survey indicates that more family offices are either engaged with AI or considering future investments, with over half already holding a stake in related public equities or private equity funds.
Hofmann points out crucial differences, remarking that while many family offices participated in the speculative nature of cryptocurrencies, AI represents a genuine investment theme attracting serious capital. “AI is a theme that people are interested in and they’re putting real money into it,” he emphasizes. This divergence showcases the evolving priorities within family office strategies, reinforcing their position as informed, long-term asset allocators in response to the dynamic financial landscape.
Family offices are clearly navigating towards a promising era of investment, characterized by optimism and an adaptive strategy to embrace risk whilst acknowledging potential pitfalls. As they continue to recalibrate their portfolios to seek growth and diversification, their investments reflect a broader shift in the financial ecosystem that could have lasting impacts on investment patterns in the years to come.