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(Bloomberg) – Rick Stone, a former Cadwalader partner, Wickersham & Taft, sees tough times for family offices trying to roll out money.
The head of Stone Family Office doubts that the bond market will provide a real return over the next decade, that stock markets will fall significantly, then remain unchanged, and that too much venture capital and private capital will continue to continue also. few opportunities.
"It's very difficult for family offices to allocate money," said 60-year-old Stone, whose initial fortune came from litigation costs.
Stone has a good point of view on action, since he runs the bi-monthly meetings of the Palm Beach Investment Research Group, a network of 35 family offices located in Palm Beach, Florida. "The areas in which to invest are fewer and there is a lot of money to look for these spaces," he said.
This market vision is shared by many of the 360 global offices with one or more buildings surveyed as part of the UBS Global Family Office 2019 report, which was produced in collaboration with Campden Research and published on Monday. A majority of them expect the global economy to go into recession by 2020, with the highest percentage of gloomy respondents among emerging markets. About 42% of the family offices in the world have cash reserves.
"More caution"
"Very high net worth investors are more cautious and are concerned about public equity markets," said Timothy O'Hara, president of Rockefeller Global Family Office. "This has more people thinking about private investments, alternative investments or cash flow."
Jeffrey Gundlach, chief investment officer of DoubleLine Capital, said this month that he thought there would be a 75% chance of a recession in the US before the presidential election from November 2020, while economists surveyed by Bloomberg in August predicted a 35% probability in the next 12 months, rising. four percentage points from a month earlier. At the same time, the World Bank has reduced its global forecast for 2019 to the slowest level since the financial crisis a decade ago.
Read more: What to know about recessions, including the following: QuickTake
Family offices have become a major force in the global financial markets. Campden estimates that these companies manage about $ 5.9 trillion. The UBS survey offices had an average of $ 917 million under management.
The investment results were mixed for those who responded to the questionnaire, which ran from February to March. According to UBS, average returns from family offices in the 12 months preceding the survey were 5.4%. Developed market equities were a big disappointment, generating an average return of 2.1%. The highest average earnings (6.2%) were recorded in family offices in Asia-Pacific and emerging markets, followed by 5.9% in North America and 4.3% in Europe.
Star asset
Private equity was the flagship asset class with an average return of 16% for direct investment and 11% for investment in funds. Real estate also performed well, with an average return of 9.4%, and now accounts for 17% of the average portfolio of family management offices, up 2.1 percentage points from the previous year. last year. Over the coming year, 46% of families have announced plans to invest more in direct private equity investments, with 42% focusing more on private equity funds and 34% focusing on private equity investments. more towards real estate, according to the survey.
Family offices are also increasingly focused on a different type of potential disruption: succession planning. This year, 54% of respondents reported having a succession plan in place, compared with 43% last year. However, only one-third of the world's family offices report having written plans.
To contact the reporters on this story: Suzanne Woolley in New York at [email protected], Ben Stupples in London at [email protected]
To contact the editors in charge of this story: Pierre Paulden at [email protected], Steven Crabill
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