4 things of concern for family offices and UHNWIs revealed by Citi

Sentiment is positive but there is an air of caution according to global poll of wealthy investors

4 things of concern for family offices and UHNWIs revealed by Citi
Steve Randall

Family offices and ultra-high-net-worth individuals (HNWIs) are cautiously optimistic about next year, despite some clear concerns.

The 2021 Family Office Survey from Citi Private Bank’s Private Capital Group reveals that more than three quarters of respondents are seeking returns of at least 5% over the next 12 months.

Two-thirds of respondents said they were ‘overweight’ or ‘neutral’ on commodities in their portfolios, and there was also a continued shift in interest in emerging market equities.

For those family offices with assets under management (AUM) of US$500 million or more, three in ten are seeking returns of at least 10%. This level is also sought by 19% of those with smaller AUM with the disparity between the two likely reflecting the greater access to markets and additional tools of the larger institutions.

Direct investing in private enterprise is on the rise, with almost half of respondents allocating at least 25% of their overall exposure to directly purchased corporate capital structures.

“Among our many intriguing findings, it’s the rise of direct investing in private enterprise that reflects deep confidence in the flexibility and strength of the global economy,” said James Holder, global head of Citi Private Capital Group, Citi Private Bank. “It also underlines the vital role family offices and private capital play in supporting innovation, entrepreneurship, development of the stakeholder economy, creating jobs and new solutions to the challenges of our day.”

Main concerns

There are four clear themes that are concerning these wealthy investors.

  1. Concern on rising inflation.
  2. The prominence of high cash levels in the face of low yield environment.
  3. Continued growth in portfolio allocation to direct investing opportunities.
  4. A marked comeback in portfolio values year over year despite prevalent degree of macroeconomic uncertainty.

“In these unusual times, our exclusive survey offers an invaluable glimpse of the thinking of family offices and other leading investors,” said Ida Liu, global head of Private Banking. “It’s reassuring to note that investor sentiment isn’t negative. Instead, family offices have weathered the COVID crisis well and are uniquely positioned to deploy further capital as they see opportunities arise.