Freedom Day has been and gone. Night owls dance until dawn, workers return to the office and people across England commemorate the ending of more than 12 months of COVID-19 restrictions. But while we hear of a new normal and what that looks like in terms of mask-wearing, shopping and travel – what does the future of investing look like?
According to our new survey, it is higher-risk, higher-reward and newly global.
We surveyed more than 100 Family Office Leaders as part of our Family Office Survey of the Year to determine post-pandemic investment trends and what a new investment world might look like. We found that overwhelmingly, Family Offices are more prone to taking risks, more opportunistic and less restricted by physical borders as a result of the COVID-19 pandemic.
The survey revealed that 59% of Family Offices are more prone to taking risks following COVID-19 and this is evident no greater than in the move to invest in more niche asset classes. 74% of Family Offices diversified their investment portfolios as a direct result of COVID-19 with 58% increasing their investments in Private Equity over the course of the pandemic and 68% increasing their direct investments.
Aside from Private Equity, 92% of Family Offices reported that they invest in Equities, 84% in property and 68% in fixed income. The top three are followed closely by 63% who have continued to invest in venture capital, 61% in hedge funds, 50% in Commodities and 26% in structured products. A further third of Family Offices also state that they invest in currencies (24%) and cryptocurrencies (12%).
These figures come exactly one year after the launch of our 2020 Benchmark Report which found that 79% of Family Offices had been investing in Private Equity, 79% in Equities, 86% in Property, 65% in Fixed Income and 42% in Venture Capital. While just shy of 20% more Family Offices invest in Venture Capital, we discovered a 2% drop in Property and 3% drop in Fixed Income over the course of the pandemic.
When asked which asset class they concentrated on most during the pandemic, 95% reported Private Equity, 79% said equities and 29% said it was hedge funds but, it isn’t just new asset classes that have caught the attention of UHNW family investors in the post-pandemic world.
The same survey revealed that 29% of Family Offices have invested in new geographical regions as a result of the pandemic, 50% of which invested in Asia, 19% in the Middle East, 18% in the USA and 13% in Europe.
Asia has seen phenomenal growth throughout the pandemic with China’s economy growing a record 18.3% in the first quarter of 2021 alone, the biggest jump in GDP since 1992. Chinese billionaires also saw their wealth soar by 41% while Beijing overtook New York as Billionaire Capital and Hong Kong rolled out its red carpet to Family Offices. It is therefore unsurprising that the region has captured the attention of Family Offices. The Middle East in second position is quite easily explained too.
The Middle East is playing a pivotal role in the IPO boom we see so often today and its link to Family Offices is Family Business. More and more of which are pushing to go public and creating Family Offices to manage the liquidity it creates.
While the new normal is still yet to find its feet, it seems Family Offices are more prone to taking risks and keen on investing in not just new subject matter areas but geographical regions too. Clearly, the risk is also worthy of a reward.
55% of Family Offices reported a significant growth in their AUM post-pandemic while 42% said they generally remained the same and just 3% said they considerably decreased during the last 12 months. An incredible achievement given the uncertainty and fiscal collapses witnessed during the global pandemic.
Family Offices have always been opportunistic and willing to take risks but the COVID-19 pandemic accelerated both exponentially. The shift in risk appetite and move to further diversification to incorporate more niche asset classes also created extraordinary opportunities for businesses like ours with more Family Offices hiring more Investment Teams to manage their new investments.
In fact, according to the survey, 29% of Family Offices have expanded their Investment Teams to manage their new investments and we have seen this first-hand with the majority of our mandates over the last 12 months being focused on investments.
With a bigger appetite for risk, larger in-house teams to meet the demand and reward-worthy incentives to match, the new post-pandemic investment landscape is certainly going to be an interesting one to watch.