A study of ultra-wealthy individuals in family offices and other areas finds, perhaps unsurprisingly, that they are keeping some of their financial powder dry
A Citi Private Bank study of 179 respondents from family principals and office heads are mostly cautious about the investment outlook going out for the coming 12 months, unsurprisingly because of COVID-19 as well as uncertainty the kind of tax and monetary policy mix they might face.
The survey, from the private bank’s Family Office Leadership Program, found that nearly three-quarters of respondents took a cautious stance. Ultra-high net worth clients are taking a conservative position, although they also watch opportunities and risks that the global pandemic generates.
Going into 2021, nearly half of those surveyed expected meagre total portfolio returns in the next four quarters of 1 per cent to 5 per cent. When asked what portfolio changes they now plan to make, 56 per cent reported making “some tactical changes,” while only 14 per cent reported making “significant portfolio changes”.
The findings chime with the comments made to this publication from wealth management professionals, who have said they are trying to educate clients that future returns will be on the moderate side, contrasting with the past decade. The industry continues to wrestle with how to deliver returns for controlled amounts of risk at a time of almost zero or even negative interest rates.
Among other findings, Citi Private Bank said a “remarkable” 59 per cent of family offices said they have boosted allocations to direct investments for the next 12 months – continuing a theme of how UHNW individuals are being drawn to this space. In terms of direct sector investments by clients in a post-COVID world, respondents named information technology (24 per cent), healthcare (16 per cent) and real estate (15 per cent) as their three top preferences.
“Our findings capture the sentiment of respondents from all regions of the globe. We find that family offices and ultra-high net worth individuals have weathered the crisis well. They are positioned to deploy further capital as they see opportunities arise, especially in private markets. However, it cannot be ignored that the survey found liquidity to be at a premium, and clients often willing to sacrifice short to medium term returns to maintain that,” Stephen Campbell, managing director and chairman, Private Capital Group, Citi Private Bank, said.
The survey was taken from a programme held from 15 June to 8 July 2020, with polling done online. It drew responses from a total of 179 participants. Of the respondents, or 71 per cent were those with family offices, while the remaining 29 per cent were ultra-high net worth individuals who do not have a family office. In total, respondents hailed from 103 different countries.