The world’s wealthiest families saw investment returns judder to a near halt in 2015, lagging expectations for a third straight year despite gains in private equity and real estate, a report on Thursday showed.
The average “family office” portfolio returned just 0.3 percent in 2015, the UBS/Campden Wealth Global Family Office Report 2016 showed, down sharply from 6.1 percent in 2014 and 8.5 percent in 2013.
“Private equity and real estate once again outperformed most other asset classes, and will have saved many family office executives the indignity of delivering overall portfolio losses to the beneficial owners in the last year,” the report said.
“Both of these illiquid assets are core parts of ultra-high-net-worth portfolios, and in the last few years have ensured that the fortunes of the world’s wealthiest have comparably outperformed their less wealthy counterparts.”
The average allocation to private equity was 21.6 percent, the study showed, with a benchmark return of 5.9 percent, while the average allocation to real estate was 9.2 percent, with a benchmark return of 15.3 percent in Europe.
By contrast, more traditional asset classes fared less well, with the benchmark return for developed market equities, to which the average allocation was 19.4 percent, down 2.7 percent.
“There’s an interest in more real-asset investments because that’s where you still find an acceptable yield,” Oliver Muggli of Swiss-based Mandorit, which advises on more than 1.5 billion euros (US$1.7 billion) in assets, told Reuters.
For the third year in a row, the returns from every asset class failed to meet the expectation of those surveyed, with the biggest disappointment coming from equity-linked assets, said the report, which drew contributions from 242 family offices.
As a result, expectations for 2016 had been revised sharply lower, with developed market equities expected to return 5 percent and developed market fixed income 2.6 percent.
(Reporting by Simon Jessop)
Photo courtesy of Reuters/Tim Chong