The majority of family offices will not significantly alter their asset allocation strategies in 2021 despite the likely market turbulence and challenging economic conditions that lie ahead.
This is the chief finding from a survey of family offices conducted by BlackRock. Of the 185 offices that were canvassed, only 23% said that they plan to make material changes to their asset allocations.
BlackRock ascribes this to the long-term investment outlook adopted by most family offices. However, the asset manager also warned against viewing the events of 2020 as simply short-term volatility and ignoring the likely long-term impacts.
“While we recognise Family Offices have a long-term investment horizon, we believe that the nature of the crisis will have a long lasting impact on economic growth, interest rates and corporate fundamentals leading to structural shifts across asset classes,” said Sheryl Needham, managing director, head of Emea family offices at BlackRock.
“It’s important that even long-term investors consider the resilience of their portfolios by reviewing their strategic asset allocation, to ensure they are positioned to navigate current markets, protect wealth and to harness opportunities through the recovery.”
Where there are changes to allocations, they are likely to centre on alternative asset classes. More than half (55%) plan to increase their allocation to private equity.
Private debt is also set to feature more in family office portfolios with 66% of respondents stating that they are attracted to the asset class because of potentially higher returns in dislocated markets.
Just over a third of family offices (38%) also expect to increase allocations to hedge funds while almost twice that number (62%) say they will invest more in infrastructure, albeit the majority of family offices currently allocate less than 5% of their portfolio to this asset class.
Other issues that are likely to influence changes to asset allocation include the need for greater liquidity, concern about equity valuations and replacements for fixed income allocations.
The survey also shows that, aside from asset allocation, a top concern for family office CIOs is the threat of inflation as a result of the massive fiscal and monetary stimulus deployed worldwide to combat the economic impact of the Covid 19 pandemic.
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