Session Recap: Highlights from the 2020 FOX Global Investment Survey
We are delighted to share important highlights from the 2020 FOX Global Investment Survey. FOX produces this annual survey of 120 family offices, and offers insights into what these family enterprises are doing right now around investments.
While the survey is focused on the end of 2019, it includes the notable effects of Covid-19, as not surprisingly, pandemic concerns grew immensely during Q1 and Q2 of 2020. In fact, when asked which global issue survey participants are most concerned about having a negative impact on their investment portfolio, 97% report that the pandemic is their biggest worry. Trade wars and political volatility are distant seconds.
While certainly the pandemic is causing high volatility and disruption around the world, the survey reveals an impressive, albeit cautious, optimism by participating family offices. Overall 79% of families say their top concerns about the Covid-19 era are negative financial impacts, recurring lockdowns leading to global recession, and economic instability. Even so, families are moving from a crisis perspective to an opportunistic view. Most family offices report the positive points of keeping their family and employees safe and working remotely, already having critical technology systems in place, and having a crisis committee at the ready.
Interestingly, it seems that private is the new public, as investments in private equity are paying off significantly over the long run. When asked what financial actions are being considered by family offices due to Covid-19, 74% of respondents cite opportunities for private investments. This is followed by cost containment and increasing charitable contributions. To note, every single family office in the survey says it will make at least some financial changes.
One clear indicator of optimism is the increasing levels of cash within portfolios. As well, families are continuing to invest, which is a positive sign. We all know you can’t save your way out of a crisis, but you can invest your way out of a crisis.
Although we see family offices considering every single sector for their portfolio, the biggest sector winners during Covid-19 are technology, distribution services, and business services. The biggest sector losers of Covid-19 are hospitality and leisure, energy, and real estate.
For all respondents asset allocation is largely dominated by equities at 40%, and a growing number of liquid assets at about 30%. At this point many family office portfolios look more like endowments, with more liquid assets than typical. Hedge funds are down, fixed income is down, and cash is up. Overall investment performance in 2019 was 14.5%.
It is clear that the U.S. is more optimistic than Europe. Latin America is actually quite pessimistic, while Asia is split. So right now it’s a bit of a mixed picture, although U.S. family offices seem to be faring better than expected. And we found that these overall insights are true and the messages prevail, whether in the U.S. or international.
Importantly, across the board the survey shows that family offices are working more closely with professional advisors. Having professional advisors and an internal CIO is yielding significantly higher performance over time. As well, more families are emphasizing their strategic outlook with focused thinking on vision, values, succession, and governance.
Lastly, family enterprises are becoming much more committed to social impact investing. Some say Covid-19 has caused this deeper concentration on impact investments, including a focus on medical manufacturing, volunteer work, and donating money to hospitals. It’s no surprise that impact investing is becoming increasingly relevant right now, with more than 75% of impact investors choosing private funds, and more than half of investors planning to invest directly.
Most family offices are indeed planning to allocate some assets to making a social impact, largely focused on the predictable choices such as environmental sustainability and resource conservation, but also on a few new sector choices such as education, microfinance, and communications.
The demographics of the 120 family offices surveyed are as follows:
- 73% are U.S. based;
- 50/50 split of large offices versus small offices;
- 85% have investment professionals on staff, such as a CIO;
- 68% have an investment committee;
- 50% own the business that generated their wealth, and that business makes up about 50% of their net worth;
- 78% are 1st or 2nd generation business owners;
- 46% have investable assets under $250 million, and ranges up to 18% with $1billion in assets;
- Average investable assets is $747 million, and the median is about $300 million.
 | Miguel López de Silanes Gómez is the market leader for Europe and Latin America at Family Office Exchange (FOX). He is responsible for delivering FOX services to current members, and also actively works to expand the network in Europe and Latin America. His base is in Madrid, but he spends half of his time in Latin America. Areas of Expertise: Enterprise Families, International Trends |