Long-term investors in today’s world: how family offices stand out
This year's Schroders Global Investor Insights Survey reveals that family offices are embracing opportunities in private assets as they navigate market volatility.
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In an era marked by economic uncertainty and shifting market dynamics, family offices are embracing change and reshaping their investment strategies.
This year’s Schroders Global Investor Insights Survey reveals family offices are not only grappling with market volatility but are also increasingly seizing opportunities in private assets, signaling a proactive and confident approach to the future.
The survey, which questioned more than 100 family offices around the world, also offers insights into the most pressing issues affecting their business decisions and the investment themes that they believe are here to stay.
Interest rates and central banks on top of the agenda
As the era of high interest rates appears to be nearing its end, monetary policy remains a critical concern for investors. Family offices around the world are particularly focused on how sustained high rates and central bank policies could impact their investment portfolios over the next year. This highlights a blend of cautious optimism amid economic uncertainty, mirroring sentiments observed among the broader base of institutional investors in our survey.
In September the Federal Reserve (Fed) opted for a larger than expected cut of 50 basis points (bps). Looking ahead, our economists believe that if the Fed continues to cut rates aggressively while the economy proves more resilient than expected, monetary policy could end up too loose. This would risk reviving inflationary pressures that were previously thought to be diminishing.
George Brown, Senior US Economist, said: “Our expectation remains that the Federal Open Market Committee (FOMC) will deliver 25 bps rate cuts in both March and June next year before pausing to take stock of the 150 bps of cumulative easing it will have delivered by then. Providing inflation subsequently remains contained, this ought to open the door to further modest easing in 2026.”
Indeed, economic downturn as well as geopolitics are cited as key risks for 65% of the surveyed group. Despite this, almost 60% of respondents expressed confidence in achieving their investment goals in the next one to two years.
Overall, our key message is for the Fed to maintain its commitment to controlling inflation.
The elections’ effect
Half of the world's population is expected to vote this year, but many investors view the US election in November as the most crucial event for economic growth and asset allocation.
In our survey, family offices demonstrate a more bullish outlook on the upcoming global elections, asserting that these events are largely short-term noise. More than a third of these investors anticipate that the resulting uncertainty may present viable investment opportunities, suggesting a proactive stance compared with other institutional investors.
Family concerns
Amidst the backdrop of geopolitical uncertainty, the rise of Artificial Intelligence (AI), and the pressing issue of climate change, many investors, including family offices, are re-evaluating long-held assumptions and strategies. Our survey reveals that risk and investment oversight is the top concern for 41% of family offices, highlighting their heightened vigilance in managing portfolios in a volatile market environment. It is critical that they have a coherent strategy for navigating the changes ahead.
That is why 38% of family offices say investment selection remains a key priority and is the second most cited concern.
Living in a period of changes also affects the process of succession planning and intergenerational transfer, another top concern for 35% of the family offices in the survey.
Katherine Cox, Global Head of Long-Term Asset Owners, said: “We asked respondents about their use of AI for the first time in this year’s survey as it’s a topic that has picked up significantly in interest from our clients. It’s interesting to observe that 36% of our respondents are already using AI in their investment research and analysis, whilst 33% are using it for gaining internal operational efficiencies. This is a trend we expect to accelerate in the coming years.”
Private markets take center stage
Demand for private markets is ramping up – not just among institutional investors, but much more broadly. It’s widely recognized that private assets can provide a return uplift over public markets and, in some cases, a reduction in risk, whilst also offering diversification benefits. Family offices are not just following this trend but are leading the way. Our study reveals an impressive 77% of family offices invest in private markets, compared to nearly 70% among other institutional investors.
Not only are more family offices investing in private markets, but they also allocate significantly more than other investor types. One-third report that private markets make up 20% or more of their overall portfolio, highlighting their higher risk tolerance and greater flexibility in investment choices. Additionally, their extensive networks likely provide access to niche and compelling investment opportunities in the market.
Johanna Kyrklund, Co-Head of Investment and Group CIO, said: “We often talk about private assets as a big block, [but] we always have to break it down to what it is bringing to your portfolio. Is it giving you access to themes that you can't get easily through public markets, like AI? Is it providing diversification? Or is it providing some contrarian opportunities?”
Looking at the asset classes preference, private equity (56%), real estate equity (43%) and private debt (41%) were the three areas where family offices would likely be increasing their allocation towards in the next twelve months.
Unsurprisingly, half of the respondents are particularly attracted to the long-term nature and potential returns offered by private markets.
A large group (44%) of family offices also indicate they outsource some or all of their investment activities in this space, indicating the need for strong relationships with their GP network.
Kathrine Cox says: “These results mirror the interest we have seen from family offices across our private assets platform, with our expertise in small to mid-market private equity opportunities particularly resonating. Family offices are uniquely positioned to be able to take a long-term view, whilst also having the ability to be nimble in their decision-making to take advantage of opportunities.”
The themes to look out for
The survey identifies significant thematic trends that family offices anticipate will shape the investment landscape over the next years. Disruptive technologies, including AI, smart manufacturing, and robotics, lead the way, with 55% of family offices believing equities are the best asset class to capture these trends.
Again, the trend of decarbonization, encompassing climate change and energy transition, prompts significant interest in private markets, with 42% of family offices anticipating robust opportunities in this area. Indeed, more than 80% of the respondents are either already investing in the energy transition, or plan to do so in the next one to two years. We know that the energy transition presents enormous opportunities for investors: this year’s findings align with the growing interest we see from clients for infrastructure and renewable energy assets, in particular.
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