Family office investment managers expect to increase allocations to real estate in the next 12 months as high-net-worth investors look for higher returns and optimism about the global economy increases.
Research from Ocorian, which provides services to high-net-worth individuals and family offices, found that 72% of family office investment managers surveyed see their allocation to real estate increasing in the next 12 months, with 30% expecting it to increase dramatically. Some 19% expect it to stay the same as today, and just 8% see it decreasing.
The international study involved more than 130 family office investment managers responsible for more than $62bn (£51bn) assets under management.
More generally, it found that family offices are rediscovering their appetite for risk in the search for stronger returns, as they count the cost of being overweight in cash over the past two years.
Some 87% of family office investment managers predict an increase in the risk appetite of their clients over the year ahead and around a third (31%) forecast a dramatic increase in family offices risk appetite.
Ocorian, which works with more than 60 family offices around the world, found the key reasons for the change in attitude are optimism about the global economy. Around 57% questioned said there was a feeling that inflation had peaked while 54% believed markets were over the worst and set for recovery.
However, there is also growing interest in alternative assets and riskier investments in general. More than half (56%) said there was greater transparency around riskier and more specialist asset classes such as digital assets, while 42% are encouraged by improved regulation in the sector.
It is a stark contrast to the past two years, which saw many family offices and high-net-worth families focus on cash. Almost all (99%) family offices questioned – which included single and multi-family offices and only those who use third-party private client service providers – agreed family offices have been overweight in cash for the past two years and are now ready to invest again.
Emerging market equities and investment-grade fixed income are the asset classes likely to see the most dramatic increases in allocations. US equities plus alternative assets, including hedge funds, private equity and private debt, are also likely to see dramatic increases in allocations over the next 12 months.
Ocorian head of family office Amy Collins said: “Family offices have quite rightly taken a conservative approach to risk in the past two years given the high levels of volatility and uncertainty in global markets. That, however, is changing and there is an increasing appetite for risk across the sector as they look for higher returns.
The research, conducted for Ocorian by independent research company Pureprofile, covered family offices in the US, UK, Canada, China, Germany, India, Norway, Saudi Arabia, Singapore, South Africa, Sweden Switzerland, UAE, Denmark, France and Japan.
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