Recent reports indicate that family offices worldwide are reassessing their investment strategies, with 60% planning to make strategic changes in their asset allocation over the next year. This figure represents double the rate recorded in the past five years, according to the UBS Global Family Office Report.
As these offices aim to reduce their investments in the United States, they are looking to increase their stakes in emerging markets, such as Latin America and Africa. This shift is part of a broader strategy for geographic diversification in light of the growing risks facing the global economy.
Details of the Shift
Data shows that North America is the only region where family offices plan to decrease their investments in the next 12 months. John Matthews, Head of Wealth Management for UBS in the Americas, noted that concerns over trade tariffs have evolved into greater worries about geopolitical tensions, global debt, and rising interest rates.
This trend reflects a broader movement to reduce reliance on the U.S. dollar, with more than a quarter of family offices planning to decrease their holdings of dollar-denominated assets. Additionally, two-thirds of these offices expect a decline in confidence in the dollar's role as a reserve currency.
Background & Context
Historically, the United States has been viewed as a safe haven for investors; however, recent economic and political changes, including wars in Ukraine and Iran, have complicated the investment landscape. The lack of a true safe haven has prompted investors to seek a balance of risks across different regions.
The concept of "diversifying jurisdictions" is emerging as a new strategy among family offices, as investors aim to spread their funds across multiple countries to mitigate risks. Studies have shown that two-thirds of family offices hold tradable assets in at least three jurisdictions.
Impact & Consequences
Family offices are increasingly directing their investments toward emerging equities, infrastructure, and gold, while planning to reduce their holdings in cash and real estate. This shift reflects a response to the rising geopolitical risks, with geopolitical uncertainty being identified as the primary expected risk in the coming years.
Data also indicates a significant disparity between family offices in the United States and those abroad, with American offices preferring to remain focused on the domestic market, while non-American offices seek to diversify their investments away from the dollar.
Regional Significance
Amid these changes, Arab countries may find themselves in an attractive investment position, especially with the growing interest in emerging markets. This trend could lead to increased foreign investments in the region, contributing to economic growth.
In conclusion, this shift in investment strategies among wealthy family offices signals significant changes in the global economy, as investors seek to reduce risks and adapt to a changing economic environment.