The UBS Global Family Office Report 2024 provides a comprehensive look at the evolving strategies of family offices. Representing insights from 320 single family offices with an average net worth of $2.6B, the report highlights substantial shifts in asset allocation. Family offices have significantly increased their allocations to developed market fixed income, the largest rise in five years, in response to elevated bond yields and declining commercial real estate prices. Geopolitical conflicts and climate change are identified as top risks over the next five years, driving cautious investment strategies. The report also reveals a growing reliance on active management to diversify portfolios, particularly as stock performance diverges. North American assets remain a strong preference, bolstered by advancements in generative AI technology. Additionally, family offices with operating businesses are using strategic asset allocation to mitigate economic exposures, with a notable trend towards private equity funds and direct investments.

"With cash rates likely to fall, many family offices aim to fund their increased fixed income allocations mainly from cash. Of those family offices seeking to add to fixed income over the next five years, more than half (53%) say that they plan to do so by shrinking cash allocations. Additionally, around a fifth plan to fund higher fixed income allocations by cutting their weightings in private equity (21%) and real estate (20%) respectively."

UBS

China's economic miracle is fading, presenting President Xi Jinping with unprecedented challenges. For decades, China experienced rapid income and wealth growth, but recent setbacks—such as a real estate collapse, trade tensions with the US, a crackdown on entrepreneurs, and extended Covid lockdowns—have stalled this prosperity. Incomes are rising at the slowest pace since the late 1980s, and household wealth, heavily tied to real estate, is plummeting. Despite government efforts to stimulate the economy through bond issuance, mortgage rate cuts, and new home-buying schemes, long-term issues like high debt, overcapacity, and a low fertility rate persist. Public discontent is growing, fueled by economic insecurity and increased political control and surveillance under Xi. This environment contrasts sharply with the relative openness of previous decades, posing significant governance challenges for President Xi.

Vanguard Group, a $9 trillion fund giant, is at a pivotal moment as it appoints an outsider, Salim Ramji from BlackRock, as its new CEO. This marks a significant shift from the era of John "Jack" Bogle, who founded Vanguard and championed low-cost index funds. Ramji’s appointment signals a departure from Vanguard’s insular culture and comes amid mounting pressures to cut costs and enhance performance. Historically, Vanguard has thrived by popularizing passive investing, growing its market share in ETFs to 29%. However, its low-cost model means costs sometimes outpace revenue. The firm now faces increased scrutiny from regulators like the SEC, and Ramji will need to navigate these challenges while staying true to Vanguard's mission of low-cost investing. Interviews with former employees reveal a company undergoing a transformation, with a shift towards performance-based culture and away from lifelong job security. Ramji, known for his strategic acumen rather than trading expertise, will need to win over loyal "Bogleheads" and address internal dysfunction. As Vanguard seeks to expand into new markets and diversify its offerings, Ramji's leadership will be crucial in steering the firm through this critical phase.

Alternative Investments Gain Traction Among Smaller Endowments and Pensions

https://www.forbes.com/sites/forbesfinancecouncil/2024/05/22/how-smaller-institutions-are-adopting-alternative-investments/

Written by:

Andrew Popp | Sr. Research Associate