Wealthy Families Look Past Volatility for Strong Investment Returns

Family offices across the world are expecting to post positive investment returns this year despite concerns over trade disputes, geopolitics, and the potential for rising inflation, according to a new report from Citi Wealth’s Global Family Office Group. 

“Even with tariffs and global uncertainty, in general, especially as people think through their top concerns…[they] still have a positive outlook,” says Richard Weintraub, head of Citi Wealth’s family office group for the Americas. 

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Citi surveyed 346 family offices from 45 countries with an average net worth of $2.1 billion. It was the largest, most global group of respondents Citi has fielded since it began surveying family offices seven years ago. Of those surveyed, 47% have more than $500 million in assets under management and 63% of these larger family offices are based in North America. 

Of those surveyed, 97% expect to realize positive portfolio returns this year, with 30% expecting returns of between 10% and 15%, and 8% expecting returns of 15% or more, the report said.

That’s despite some very real concerns. A majority (60%) cited global trade disputes as the top issue right now. Citi Wealth’s chief investment office agrees, noting that the effects of tariffs haven’t been fully felt in the economy yet.

“Companies are still assessing how much of the tariffs they can pass on to consumers,” the report said. “We see threats to economic growth and corporate profit margins from the highest import levies in nearly a century.” 

Despite worries, the wealthy families surveyed haven’t made big changes to the asset allocation of their portfolios. They have, however, moved assets into more actively managed strategies in public markets, and into more direct investing strategies in private markets. They have also become more interested in hedge funds.

According to the report, 70% of families surveyed have made direct investments in private companies, and 40% increased their allocation to direct investments this year. The shift reflects a desire to be more hands on, but also the growing size and maturity of family offices, Weintraub says. “They have the ability to take a look at direct investments versus just allocating to private-equity funds.”

A lot of the direct investment and co-investment activity is in secondary stock offerings by successful private companies, such as tech leaders OpenAI, xAI, or Perplexity, he adds. Clients may also need to sell direct shares they own in privately held companies. They may say, “‘I want to sell $10 million of my xAI,’ and we help make a market on the secondary private side.” 

Aside from global trade, large family offices are also worried about U.S.-China relations (43%) and inflation (37%), the survey said. 

Those worries are showing up in negative views of several investment categories for the next 12 months. Though 30% of families had a positive view of developed-market stocks when surveyed last year, this year only 17% are optimistic on the sector, the survey found. Similarly, 26% of those surveyed were optimistic about private equity last year, while only 7% are positive this year. 

Their relative pessimism extended to global developed-market investment-grade bonds, viewed positively by 23% of those surveyed last year and only 4% this year. The biggest exceptions were for hedge funds (getting a thumbs-up by 14% of families this year from 0% last year) and emerging market stocks (receiving a positive outlook by 11% of families this year vs. 4% last year).

Weintraub cautioned, however, that the global numbers skew differences in attitude depending on where families are based. Though 43% of global respondents named U.S.-China relations as a top concern, it made the top of the list for 53% of families based in Asia Pacific, but only 32% based in Europe, the Middle East, and Africa. Similarly, 46% of family offices based in North America cited inflation as a worry, while it was cited by only 29% of Asia-Pacific families. 

As of June, 59% of the families who responded to Citi’s survey said their portfolios were up between zero and 10% for the year to date; another 25% reported gains of more than 10%, and only 6% said their portfolios were in the red.

Overall, the families surveyed allocated 27% of their assets to public stocks and 20% to private equity—11% in funds and 9% was invested directly in private companies. They allocated about 45% to alternative investments, including 12% to direct real estate investments, 5% to hedge funds, and 3% to private credit.

There were differences, however, between offices with more than $500 million in assets under management, and those with less. The somewhat smaller offices allocated 17% to fixed income and 15% to cash and cash equivalents, for instance, while large offices allocated only 13% to fixed income and 10% to cash. Smaller offices also allocated fewer assets to private equity—17% overall compared with 22% for larger ones. 

By investing directly, family offices are indicating their confidence in picking deals that will drive returns, Citi said. Of those that invest directly, 52% choose growth companies and 37% choose early stage. Even within private-equity funds, families tend to prefer riskier categories, with 33% allocating to growth strategies.

Aside from concerns over tariffs, the firm’s chief investment office isn’t convinced that if the Federal Reserve lowers interest rates in response to softer U.S. labor market, that it will lead to a “meaningful cyclical upturn in growth, as it typically might.” In Citi’s view, “hiring and investment plans are currently more hindered by trade and policy uncertainty than by elevated financing costs.”

Write to Abby Schultz at abby.schultz@barrons.com