The Return of Active Asset Management: Insights from UBS Study of Single-Family Offices

The resurgence of active asset management has been confirmed by a recent UBS study of single-family offices worldwide. As inflation and interest rates rise, family offices are shifting their focus back to balanced portfolios and active management strategies.

According to the study, fixed income has become the most popular source of diversification, with a significant number of family offices moving towards high-quality, short-duration bonds for wealth protection, yield, and capital appreciation. This reflects a broader trend of reallocating assets towards fixed income in response to changing market conditions.

Family offices are also increasing their allocations to risk assets, with a particular focus on emerging market equities following a peak in the US dollar and the reopening of the Chinese economy. The study, now conducted in-house by UBS, highlights the evolving concerns and approaches of single-family offices, a sector that is becoming increasingly prominent in the financial services landscape.

The return to active management is seen as a response to the end of an era of low or negative nominal interest rates and ample liquidity following the global financial crisis. Family offices are now placing greater emphasis on investment manager selection and active management to enhance diversification and generate returns.

Looking ahead, family offices are eyeing value opportunities in the secondary private equity market, anticipating that institutional investors will rebalance their portfolios following declines in public markets. While there are plans to reduce real estate allocations in the short term, over the next five years, many family offices foresee increasing their exposure to the asset class.

Geopolitical concerns have overtaken inflation as the top worry among family offices globally, with uncertainty surrounding economic growth, lending conditions, and geopolitical tensions weighing on their minds. Family offices are also diversifying their regional allocations, with a focus on increasing exposure to Western Europe and the Asia-Pacific region.

Overall, the UBS study paints a picture of family offices adapting to changing market conditions and positioning themselves for growth and success in the years to come. The resurgence of active asset management and a renewed focus on diversification reflect a shift in mindset driven by rising inflation and interest rates.