Global trade wars pose the biggest investment risk in 2025, followed by major geopolitical conflict, and higher inflation, according to the results of the latest UBS Global Family Office Report 2025, which gives insights from 317 single family offices in more than 30 markets around the globe.
Family offices are private companies established by wealthy families to oversee and manage their financial affairs and investments, and their investing decisions give an insight into how professional investors deploy capital.
Hedge Funds in Favour to Manage Risk
When asked about threats to their financial objectives over the next 12 months, more than two thirds (70%) of family offices highlighted trade wars. The second biggest concern for more than half (52%), was major geopolitical conflict, followed by higher inflation. Looking five years ahead, those worried about a major geopolitical conflict increased to 61%, and 53% were anxious about a global recession. Citing the dangers of increased government borrowing, 50% of family offices were also worried about a possible debt crisis, according to the survey.
Despite these concerns, 59% of family offices plan to take the same amount of portfolio risk in 2025 as they did in 2024, staying true to their investment objectives. However, 29% of them pointed out the unpredictability of ‘traditional’ safe haven assets at a time of global economic uncertainty. The survey was conducted from Jan. 22 to April 4 2025.
As a result, 40% see relying more on manager selection and/or active management as an effective way to maintain portfolio diversification, followed by the use of hedge funds (31%). Precious metals, invested in by almost a fifth of family office portfolios (19%) globally, appear increasingly popular, with 21% anticipating a significant or moderate increase in their allocation over the next five years.
Less Emerging Markets in Portfolios
During an unstable time for trade and the global economy, a shift in strategic asset allocation is underway. Developed market equity allocations rose, on average, to 26% in 2024 and family offices planning on making changes in 2025 intend to increase this further to 29%. Over the next five years, almost half (46%) of family offices anticipate a significant or moderate increase in their allocation to developed market equities.
At the same time, after a prolonged period of disappointing returns, with economic growth typically not translating into equity market returns, family offices in the US and Europe are wary of emerging markets; more so than their peers in the Asia-Pacific, Latin America and the Middle East. Globally, family offices allocated just 4% to developing market equities in 2024 and 3% to developing market bonds but are most likely to increase their exposure to India and China over the next 12 months. Barriers to investing in emerging markets include geopolitical concerns (56%), political uncertainty, and the risk of sovereign default (55%).
Overall, continuing the trend of recent years, North America (53%) and Western Europe (26%) remain the favored investment destinations, claiming almost four fifths of all assets. Allocations to Asia-Pacific (excluding Greater China) and Greater China fell to 7% each.
A Preference for Active Management
According to the report, on average, a greater share of family office equity investments are actively managed, with just over a third (36%) managed passively. However, the finding varies by region – it’s far higher for US family offices (53%) and at its lowest in Asia-Pacific (22%). While keeping a high allocation in active management, some family offices appear to be looking to rebalance their portfolios. Some 43% of those based in Europe that have equity investments are looking to invest more in pure index-based strategies, as are 38% of those in Latin America.
When it comes to different styles of investing, family offices with actively managed equity investments are diversified across a range of styles. More than six in ten (62%) favor growth, with similar numbers seeking value (58%) and quality (62%).
Size is also a factor for four in ten (43%) family offices that are choosing actively managed equity investments. This finding suggests that they may still invest in small cap stocks, despite the outperformance of large cap equities in recent years.
The Scramble for Wealth Succession
One of the major tasks of family offices is to ensure the effective transfer of generational wealth. The UBS report shows that just over half (53%) of family offices globally have wealth succession plans for family members in place. Over a fifth (21%) stated that the owners have not decided how to divide up their wealth, while almost as many (18%) indicate that the owners have yet to discuss it.
Where families do have succession plans in place, the greatest challenge remains ensuring the transfer of wealth in the most tax-efficient manner, according to almost two thirds of those surveyed (64%). More than four in 10 (43%) see another great challenge as preparing the next generation to take on wealth responsibly, and in line with family aims. Only 26% consult with the next generation about succession planning from the outset.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
