Family offices have never had it so good, according to UBS's Global Family Office Report 2018. The average family office portfolio returned 15.5% in 2017, up from 7% in the previous year, according to UBS. The other two prominent headlines from the report reveal that alternatives now constitute nearly half of the average family office portfolio, and that almost 40% of family offices are now engaged in sustainable investing.

'This accelerating performance was driven by family offices' continued preference for equities in the context of a strong bull market,' according to UBS. 'Twenty-eight percent of the total average family office portfolio is now comprised of equities. Improved performance can also be attributed to strength within the private equity space, which comprises over a fifth (22%) of the average portfolio and has delivered returns of 18% in 2017. Reflecting this year's upward performance levels, almost half (48%) of family offices reported that their assets under management increased over the year.'

According to Sara Ferrari (pictured), head of global family office group at UBS and one of the authors of the report, 'For the first time since we have been analysing this data, Asia has led the way on performance, benefiting from a relatively high exposure to developing market equities and the high number of private equity deals in the region.'

The emphasis this year has been taking more risk through the purchase of more illiquid investments, making for an investment mix that is now 46% alternative investments for family offices. The most prominent of these options is private equity, to which allocations have increased by 22% over the year, according to the survey. Over the same period, the desire for exposure to hedge funds has fallen, while there was only a small increase in the money apportioned to real estate. 'After a small decline in allocations in 2016, family offices have increased their exposure to real estate direct investments to 17% of the average family office portfolio,' stated UBS.

Private equity will continue to be favoured, with half of the family offices surveyed expecting to invest more in these direct investments, according to the survey.

Almost the same proportion of investors have plans to increase their sustainable investments over the next 12 months, with around 40% of family offices projecting that, when the next generation takes control of their families' wealth, they will increase their allocation to sustainable investing. 'Families of great wealth feel a deep-seated obligation to make a positive impact on the world, which is reflected in a consistently high level of philanthropic activity,' said Ferrari. 'The family office structure allows them to go further and translate their values into financial returns through impact investment. Yet many are still to be persuaded to cross the line from interest to action. The appetite is there, but more work needs to be done to demonstrate the investment case and create opportunities.'

Rebecca Gooch, director of research at Campden Wealth and co-author of the report, said, 'Impact investing will be an important space to watch over the coming years. Our research shows that the next generation, and millennials in particular, are driving impact investing within the family office space. This is key as we are on the precipice of a major generational transition set to take place over the coming 10 to 15 years. This could result in the growth and transformation of the impact investing arena.'

Developing market equities will also benefit over the next year, with a third of survey respondents stating that they planned to increase their allocations, and also to private equity funds and real estate direct investments.

There are three live structured products linked to family offices on the SRP database, two of which were created by UBS and one by Unicredit. The Swiss bank has two open-ended certificates based on the Solactive Global Family Owned Companies total return Index, one based in euros and one in US dollars launched in June 2016, with the Italian bank's euro-denominated product linked to the Daxplus Family 30 Index.

The report was conducted by UBS and Campden Wealth Research and surveyed principals and executives in 311 family offices with an average size of US$808m in assets under management.

Click the link to view the full report.

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