Wealthy families’ biggest fear during the Covid-19 crisis is missing out on investing opportunities created by the volatile market, according to UBS Global Wealth Management.
Two-thirds of families surveyed for the 2020 UBS Global Family Office report released today said their top concern is not efficiently executing opportunistic investments. UBS Global Family Offices includes 121 of the world’s largest single-family offices. Most of the families have between $3 billion and $5 billion in assets and are investing on an institutional level, UBS said during a webinar on the report.
UBS conducted an initial survey in February and March and then repeated it in May to see how the pandemic had changed the families’ outlooks.
“Early during the crisis wealthy families rebalanced their portfolios to take advantage of opportunities,” said Munish Dhall, deputy head of Global Family Offices for the Americas at UBS Global Wealth Management. “By mid-May they had had time to digest the effects of Covid.
“Fifty-five percent of the families are actively involved in asset allocation,” he added. “Average allocations are 30% to public equities, 35% to private equities and the remainder to alternatives and cash. Early in the crisis, family offices increased allocations to cash and developed market equities and decreased allocations to bonds because of the low interest rates. In May they started lowering their cash holdings.”
Three-fourths of the survey participants said their portfolios performed as expected this spring and that they met their benchmarks, the report said. Reallocating helped them manage the downturn.
More than two-thirds of families now believe alternatives and private equity are the keys to high returns. Most see private equity as a presenting a broader range of diversification than other asset classes, said Ann Rybak, head of the Family Office Solutions Group at UBS Global Wealth Management.
At the same time, 71% said they now focus on expansion and growth investments and 53% favor venture capital. The favorability of public equities is gaining ground on private equities, the survey said.
Impact and sustainable investing is important to 62% of wealth families and most families have been increasing investments in these sectors. However, measurement of the results of the investments is still difficult, UBS said. Thirty-nine percent of families want to devote most of their portfolios to sustainable investing, the report said, but 43% still prioritize returns over impact.
One disconcerting result of the survey is the revelation that many wealthy families do not have a succession plan. “The current heads of wealthy families are in their 50s to 70s and have no plans of moving on,” UBS said.