The survey by the US banking group found that the average portfolio had a 45 per cent allocation to alternative assets, targeting an 11 per cent return.
Family offices are diversifying their investment portfolios, and
nearly 80 per cent of them work with external investment
advisors, according to a survey by JP Morgan Private Bank.
The study also sheds light on family offices’ approach to
cybersecurity.
The average portfolio has a 45 per cent allocation to alternative
assets, targeting an 11 per cent return. Private equity is the
most commonly held asset class at 86 per cent, and infrastructure
is the least commonly held at 9 per cent.
The findings came from the bank’s Global Family Office Report. It
conducted an online survey from October through December 2023
among 190 family offices worldwide, with an average net worth of
$1.4 billion.
Asked about the enthusiasm for alternative investments such as
private equity, the bank said family offices are more willing to
take illiquidity risk to win long-term returns.
Last week, this news service spoke to firms, including WE Family
Offices, to discuss the noise over private
markets/alternative investment, and concerns from organisations
such as the International Monetary Fund about potential strains
on the financial system.
Family offices also are consistently developing core, liquid
portfolios. On average, these portfolios allocate 26 per cent to
public equity and 20 per cent to fixed income and cash.
Cybersecurity
Cyber attacks are on the rise and family offices may be an easy
target. Nearly a quarter of family offices surveyed reported
exposure to a cybersecurity breach or financial fraud, yet only
one in five noted that they have cybersecurity measures in place.
With that in mind, 40 per cent of family offices reported that
cybersecurity is a top gap for improvement.
Costs of operating a family office are rising, the survey
found.
Large, established family offices with $1 billion or more in
assets under supervision have average annual operating costs of
$6.1 million, making management and strategic outsourcing a
priority. Nearly 40 per cent of small and midsize family
offices, with assets under supervision ranging from $50
million to $999 million, outsource investment management to some
extent.
“Family offices are focused on managing costs, and recruiting and
retaining top talent. Like any business, these two objectives may
find themselves at odds amid staffing particular roles and
services,” Elisa Shevlin Rizzo, head of family office advisory at
J P Morgan Private Bank, said. “Outsourcing certain functions
through a hybrid approach is becoming more common among family
offices of all sizes.”
Preferences for staffing and executive roles differ between US
and international family offices. US offices are less likely to
have nonfamily members as chief executive/president and chief
investment officer, with rates of 45 per cent and 71 per cent
respectively, compared with 64 per cent and 90 per cent
internationally. Furthermore, US offices are more likely to have
unpaid family members as CEO/president, at 29 per cent versus 7
per cent internationally.