The year 2024 has been a time of significant change and resilience for family offices. As we approach the end of the year, let’s take a look at some key trends that have shaped the family office space.
A focus on risk management
2024 has been an extremely volatile year. According to Deloitte Private’s The Top 10 Family Office Trends, family offices identified recession fears, geopolitics, and inflation as the top three market risks of the year. As a result, risk management has become a top priority.
To counter these challenges, a variety of strategies, including investment diversification, scenario analysis, alongside integration of advanced analytics and machine learning have been adopted to better understand and manage risks.
Investment Trends
Private Market Dominance
Both Deloitte Private and UBS highlighted that family offices maintained a strong focus on private markets in 2024, especially in private equity. This trend is driven by the potential for higher returns, diversification benefits, and greater control over investment decisions.
Shifting Asset Allocations
The Citi Private Bank 2024 Family Office Survey revealed notable changes in asset allocation strategies:
● Increased Risk Appetite: family offices have reduced cash holdings and increased allocations in higher-risk assets like equities and private equity.
● Focus on Fixed Income: Fixed income investments have gained popularity, particularly in Europe, the Middle East, and Africa.
● Regional Variations: While North American family offices remain cautious, those in Europe, the Middle East, and Asia Pacific have shown greater confidence in equities and private markets.
Sustainability and Impact Investing
Environmental, Social and Governance (ESG) factors are increasingly influencing investment decisions. Many family offices are aligning portfolios with family values and long-term sustainability goals. Impact investing, targeting both financial returns and positive social or environmental impact, continues to grow in importance.
For more insights into the world of family office philanthropy and impact investing, you can read our report, “How To Change The World, One Family Office At A Time” here.
Global Wealth Migration
2024 is shaping up to be a year of significant global wealth migration. A record-breaking 128,000 millionaires relocated globally in 2024, surpassing the previous high of 120,000 in 2023, according to Henley and Partners.
The UAE has emerged as the top destination for wealthy individuals, attracting nearly double the number of millionaires compared to the second-ranked U.S. On the other hand, China, the U.K., and India are experiencing significant outflows of millionaires. This trend in migration is the result of a combination of factors, including geopolitical tensions, economic uncertainty, and new regulations.
It is to be noted that the drivers for wealth migration vary across regions. In countries like China and the U.K., factors such as taxation, fiscal policies, and the desire for secondary citizenship, particularly in China, are driving significant outflows of wealthy individuals. At the same time, the U.S. is experiencing a trend in domestic migration, with families seeking better options within its borders. Expensive states such as California and New York have seen outflows to states like Texas and Florida. The U.S. is also seeing wealth migration inflows from neighbouring countries such as Mexico and other Spanish-speaking countries in Central and South America.
Embracing Technology
AI and machine learning have undoubtedly been the most popular topics of 2024. They are transforming the way family offices operate by enabling data-driven decision-making, portfolio optimization, and predictive analytics. These technologies can help identify investment opportunities, assess risk, and optimise portfolio performance.
At the same time, the Deloitte report highlighted the increasing prevalence of cyber threats, making cybersecurity a top priority for family offices. Striking a balance between leveraging technology and managing these risks is essential to ensuring their security and success.
The Human Factor
As we discussed in a previous article, family offices are increasingly hiring experienced professionals from fields like investment banking, hedge funds, and private equity firms to strengthen their teams. By bringing in external expertise, they ensure high-quality service and meet long-term financial goals.
Additionally, many family offices are outsourcing non-core tasks, such as accounting, legal, and administrative tasks, to reduce costs and focus on their core competencies.
For more guidance, see our resource on outsourcing investment functions here.
Growing influence of Family Offices
According to Deloitte Private, family offices have evolved from wealth management entities to key players in the 2024 global economy. Their influence extends beyond the families they serve, supporting a growing ecosystem of industries, including legal, investment, tax, and consultancy services.
At Agreus, we continue to closely monitor industry developments to provide the insights and expert opinions you need to thrive. By staying informed and adapting to these trends, family offices can secure long-term success and preserve wealth for future generations.
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