Family offices have been forced to rethink their investment strategies and pivot toward wealth preservation amid geopolitical instability and global trade wars, according to a report detailing the results of a survey conducted by KPMG Private Enterprise and the Agreus Group.
The report found that family offices have rebalanced their portfolios over the past year, shifting away from cash and toward more diversified allocations that include equities, private markets, credit, real assets and thematic investments.
“This change signals a more strategic, long-term mindset, as families focus on safeguarding their capital for future generations rather than simply managing its day-to-day deployment,” the report stated.
The online survey polled nearly 600 family office employees and conducted 20 interviews with chief executive officers, managing directors and senior leaders from family offices. The report combined findings from both the survey and the interviews and is the second “Global Family Office Compensation Benchmark Report,” following the inaugural edition in 2023.
The survey also found that family offices are consolidating and taking a “more conservative approach to recruitment, cost, and compensation,” the report stated, adding that the post-COVID days of family offices fighting over talent are over, as fewer are looking to expand. This can be attributed in part to the rising costs of running a family office, which the report said are “prompting a tighter focus on cost control and operational efficiency.”
As a result, hiring remained “relatively muted” over the past year, with most family offices reporting no change to their team structures.
“This must be the reflection of the uncertain markets and the lack of willingness to risk growing teams at such times, and focusing on maximizing existing teams,” the report stated. “This may also reflect the growing use of technology, which has allowed family offices to ‘do more with less.’”
Despite the belt tightening, the survey found that demand for skilled investment professionals at family offices is rising, as the offices increasingly use more sophisticated investment strategies. “This creates added complexity around compensation structures, especially regarding bonuses” and long-term incentive plans, according to the report.
Additionally, the number of family offices operating out of multiple locations has risen to 44% from 30% in 2023, according to the report, which it said is a reflection of “both the global mobility of ultra-high-net-worth families and a more international approach to governance, operations, and investment.”
The report noted that most family offices polled said they opened additional locations for tax reasons, “highlighting the family offices’ sensitivity to wealth taxes and the appeal of countries offering [tax benefits as]these enticing incentives.”
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Tags: Asset Allocation, Family Offices, KPMG