Wealthy families flock to safe assets as recession fears mount
The world’s wealthiest families are increasingly flocking to safe assets amid fears of a market downturn next year.
Executives at family offices are advising their rich clients to take cautious measures to safeguard against turbulence throughout the global economy in 2020.
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Almost half of all family offices are reshaping their investment strategies to protect themselves against the fallout from a recession, while 42 per cent are also bolstering their cash reserves. A fifth are also reducing leverage exposure within their investments.
The findings, released today in a report from UBS and Campden Wealth Research, found that private equity fared the best of all asset classes for family offices, achieving an average return of 16 per cent for direct investments and 11 per cent for funds-based investing.
However, developed market equities produced an average return of 2.1 percent for family offices, falling 5.2 percentage points below expectations.
“This year has seen the most concerns really coming alive,” said Sara Ferrari, head of global family office group at UBS.
She told City A.M. that families are “clearly becoming more conservative to adjust to a more of a ‘risk mitigation’ type of approach, but they are still looking for yields”.
More than 60 per cent of executives and principals among 360 family offices with an average of $917m in assets under management believe Brexit will be negative for the UK as an investment destination in the long-term and 87 per cent think that artificial intelligence will be the next biggest disruptive force in global business.
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US-China trade war tensions, Brexit uncertainty and civil unrest in several major financial hubs have dented financial expectations for the year ahead, with 55 per cent of family offices predicting a recession will take place in 2020.
Last week Bank of America Merrill Lynch released a poll showing that fund managers now think the risk of a global recession is at its highest level in more than a decade.
Monetary policy impotence and a possible bond market bubble were cited along with trade disputes as the most prominent concerns among investors.