13/09/23

FAMILY OFFICES: Wealthy families pile into bonds, private equity while shedding stocks

As published on: reuters.com, Wednesday 13 September, 2023.

Wealthy families loaded up on bonds and private equity investments in the first half of the year while slashing their stock exposure, according to a survey by Citigroup's (C.N) private bank.

More than half of the 268 family offices polled, accounting for a combined net worth of $565 billion, increased their allocations in fixed income, while 38% boosted their private equity holdings. By contrast, 38% reduced their allocation in stocks.

The shifts were the largest since Citigroup began the study in 2020. The S&P index has risen 4.12% this year through Monday, and 10-year Treasury bonds closed Monday yielding 4.288%.

Investors sought out private equity investments in the first half while the market for initial public offerings (IPOs) stayed sluggish. But the private equity investments are more conservative now than in previous years.

"Family offices are focused on high-quality companies in traditional industries, with positive cash flows," Hannes Hofmann, who runs the global family office group at Citi Private Bank, said in an interview.

The biggest worries among respondents were inflation, rising interest rates and uncertainty stemming from U.S.-China tensions.

"With inflation, market volatility and geopolitical concerns top of mind amongst ultra-high net worth investors and their families, they are readily diversifying their portfolios and considering direct and sustainable investments," Ida Liu, global head of Citi's Private Bank, said in a statement.

The family offices surveyed had an average portfolio allocations that included 22% in both public and private equities respectively, 16% fixed income and 12% cash.

Two thirds of the respondents were based outside the U.S.

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Family Offices Stocks HNWIs