Upcoming Trends in 2024 within the Realm of Family Offices
Upcoming Trends in 2024 within the Realm of Family Offices
2024 has been a period of substantial transformation and resilience for family offices. With the year drawing to a close, let's explore some notable trends that have shaped the family office landscape.
Strong Emphasis on Risk Management
The year 2024 has been marked by market volatility, and that's no secret. Deloitte Private's The Top 10 Family Office Trends reveals that family offices have flagged recession fears, geopolitics, and inflation as their top three market risks. In response, risk management has moved to the forefront.
To tackle these hurdles, various strategies have been employed, such as investment diversification, scenario analysis, and integration of advanced analytics and machine learning. These methods aid in comprehending and managing risks more effectively.
Investment Trends
Prevailing Influence of Private Markets
Both Deloitte Private and UBS have highlighted the family offices' robust focus on private markets in 2024, particularly in private equity. This trend is driven by the possibility of higher returns, diversification benefits, and greater control over investment decisions.
Shifts in Asset Allocation
The Citi Private Bank 2024 Family Office Survey discloses noteworthy changes in asset allocation strategies.
- Boosted Risk Tolerance: Family offices have seen a decrease in cash reserves and an increase in allocations towards higher-risk assets, including equities and private equity.
- Popularity of Fixed Income: Fixed income investments are gaining traction, particularly in Europe, the Middle East, and Africa.
- Geographical Differences: While North American family offices remain cautious, those in Europe, the Middle East, and Asia Pacific demonstrate higher confidence in equities and private markets.
Emphasis on Sustainability and Impact Investing
Environmental, Social, and Governance (ESG) factors are gaining prominence in investment decisions. Many family offices are aligning their portfolios with their values and long-term sustainability goals. Impact investing, targeting both financial returns and positive social or environmental impact, continues to garner importance.
Ready to delve further into family office philanthropy and impact investing? Check out our report, "Transforming the World, One Family Office at a Time" here.
Global Wealth Migration
2024 is gearing up to be a significant year for global wealth migration. As per Henley and Partners, an unprecedented 128,000 millionaires shifted locations in 2024, surpassing the previous high of 120,000 in 2023.
The UAE has risen as the preferred destination for affluent individuals, attracting almost double the number of millionaires as compared to second-ranked USA. On the flip side, China, the U.K., and India are witnessing millionaire outflows. This migration trend may be attributed to a mix of factors, such as geopolitical tensions, economic uncertainty, and new regulations.
It's essential to note that the catalysts for wealth migration vary across regions. In nations like China and the U.K., taxation, fiscal policies, and the pursuit of secondary citizenship, notably in China, are driving significant outflows of millionaires. On the other hand, the U.S. is witnessing domestic migration, with families seeking better alternatives within national borders. Expensive states like California and New York have experienced outflows towards states like Texas and Florida. The U.S. is also experiencing wealth inflows from neighboring countries such as Mexico and other Spanish-speaking countries in Central and South America.
Technology Adoption
AI and machine learning have undisputedly been the talk of the town in 2024. They are revolutionizing the way family offices operate by enabling data-driven decision-making, portfolio optimization, and predictive analytics. These technologies can help identify investment opportunities, evaluate risk, and enhance portfolio performance.
At the same time, the increasing prevalence of cyber threats calls for heightened focus on cybersecurity. Striking a balance between leveraging technology and managing these risks is critical to ensuring their security and success.
The Irreplaceable Human Element
As we discussed previously, family offices are incorporating experienced professionals from sectors like investment banking, hedge funds, and private equity into their teams to reinforce their capabilities. By integrating external expertise, they ensure high-quality service and are more likely to achieve their long-term financial goals.
In addition, many family offices are outsourcing non-core tasks, such as accounting, legal, and administrative tasks, to cut costs and concentrate on their core competencies.
For more guidance, check out our resource on outsourcing investment functions here.
The Expanding Influence of Family Offices
Deloitte Private acknowledges that family offices have metamorphosed from wealth management entities into significant players in the global economy in 2024. Their sway extends beyond the families they serve, encompassing a sprawling ecosystem of industries, including legal, investment, tax, and consultancy services.
At Agreus, we remain committed to tracking industry developments to provide the insights and expert opinions you need to flourish. By staying informed and adapting to these trends, family offices can secure long-term success and preserve wealth for future generations.
- In light of the growing importance of risk management, family offices have been investing in advanced analytics and machine learning to better comprehend and manage potential risks, leveraging strategies such as investment diversification and scenario analysis.
- Recognizing the potential for higher returns and diversification benefits, family offices have shown a strong inclination towards private markets, particularly private equity, in 2024, as reported by both Deloitte Private and UBS.