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Challenges and trends faced by family offices
By Justus Jandt
How family offices are adjusting their asset allocation and internationalizing to gain access to unique investment opportunities
Like all other investors, family offices are never immune to the impact of volatile interest rates, geopolitical upheavals and threat of further intensifying recession. A new Roland Berger study spells out the precise nature of the challenges they face and explores what strategies they are adopting to navigate the current troubled times.
"Over the past years, family offices increasingly learnt to cope with challenges by re-adjusting their asset allocation and diversify their investments through internationalization."
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Year-on-year shift in family office perceptions
A detailed survey of key professionals in the family office space was conducted in October and November 2024. Condensed from this survey, the study identifies shifts in family office attitudes to different factors of influence and developments. Interest rates, for example, are still regarded as the main challenge, albeit less so than in the previous year. Geopolitical upheavals rank second, followed by the threat of intensifying recession. Overall, family offices today appear more circumspect about many of the threats and challenges they face – Perhaps an indication that they have learned valuable lessons from a series of crises in recent years.
Family offices see interest rates, geopolitical upheavals and recession as major challenges
The challenges outlined above trigger family offices to adjust their asset allocations. While real estate remains high on everyone’s investment agenda, fixed-interest instruments have likewise edged up as rates are expected to fall further. Meanwhile, around half of all family offices are planning to enlarge their already-substantial private equity involvement either directly or in the form of funds.
Investment focus of family offices and target regions
Demographic trends and advances in medical technology (diagnostics) are among the factors that encourage family offices to see medicine and healthcare as a key target for investment. That said, more than half of family offices are also lured by the investment opportunities inherent in IT and digital business. Other areas of interest are also detailed in the study.
Mainly to diversify risk and take advantage of opportunities not available at home, nearly two thirds of family offices invest beyond their home markets and are generally happy with the results. A variety of reasons – discussed in the study – influence the geographical focus of their investments, with North America and Europe the clear favorites in most cases.
Internal challenges
In a never-ending quest to streamline their operations and deliver even better service, the study finds that family offices must address a series of different challenges as well. While cybersecurity and the creation of suitable structures to facilitate smooth business succession top this list, the number of factors that must be tackled and resolved is long indeed. However, the adaptability that many family offices have learned in recent years is at least helping them to take a calmer view of even the serious challenges that undoubtedly lie ahead.
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