A report released by UBS ‘The Global Family Office Report’ says that family offices across the world have invested 4.5% of their investible corpus in hedge funds in 2019.
However, allocation to hedge funds has reduced for the fifth year largely due to uncertainty in the economy. The report said, “For the fifth year in a row, allocation to hedge funds dropped, this last year falling 0.7 percentage points to 4.5% of the average family office portfolio. Family offices have doubts about hedge funds’ ability to protect wealth during economic downturns, and they dislike what some deem to be relatively high fees when compared to performance.”
Family offices continue to allocate sizeable portion of their wealth in private equity funds, which is the second largest asset class followed by developed market equities. Private equity funds account for 19% of the total family office portfolio. The report attributes this to performance of these funds. It said, “Private equity fared the best of all asset classes in 2019, achieving an average return of 16% for direct and 11% for funds-based investing.”
UBS collected 360 surveys and 25 interview of senior family office executives from around the globe to publish this report.