Think Advisor: Family offices across the globe have a lot in common, according to a new report released last week by UBS in partnership with Campden Wealth Research. Researchers surveyed principals and executives in 205 family offices with, on average, $890 million in assets under management. In total, the family offices in the study spanned some 40 countries on six continents managed more than $180 billion in private wealth.
The study found that the average family office investment portfolio returned an estimated 9% in 2013, with slight deviation across regions, investment strategy and family office size.
Researchers found evidence of “the great rotation” — moving portfolio allocations out of fixed income and into equities—representing the overall shift toward growth strategies in family offices globally.
Four-fifths of family offices surveyed co-invested in 2013. Office-to-office deal size averaged $119 million, while syndicated deal size averaged $76 million.
“While performance lagged slightly among developing economy family offices, our research attributed this largely to holdings of developing-economy equities and fixed income, which last year were surpassed by the meteoric rise of developed-economy equities,” Campden Wealth’s chief executive Dominic Samuelson said in a statement.
“Despite these differences, the research revealed significant similarities globally in family office investment management structures, manager selection and oversight as well as reporting requirements.”
Last year, the average family office spent 86 basis points on operating costs, nearly half of which went to investment activities. Of that amount, 21 basis points on average were allocated to external specialist firms. Family offices managing more than $1 billion allocated 35 basis points toward outsourcing, compared with an average of 58 basis points for smaller ones.
The study determined that family offices that outsourced investment management were least likely to outperform against investment benchmarks.
Moreover, those that reported high levels of beneficiary involvement said they had pursued more aggressive growth investment strategies, and had higher costs and lower performance against benchmarks.