The Iran war, additional geopolitical conflicts, escalating tariff policies and deglobalization are creating new challenges to all investors and, specifically, for family office portfolio construction.
“We view [geopolitical conflict] as systemic evidence of a regime change or transition from a unipolar world to a multipolar one,” says Richard Weintraub, head of global family office for North America and Latin America at Citi Wealth. “That shift carries structural implications: higher baseline inflation, higher interest rates and elevated market volatility compared to the last cycle.”
Family offices and their advisers are making moves in response to this transition. The “2026 UBS Global Family Office Report” found that geopolitical conflict was cited by respondents as the top risk for both the next 12 months and the next five years.
“A lot of family offices are taking a step back to look at how policy and geopolitics are feeding into the opportunities and risk that are present in markets and [to] size them for growth, relative to the hedging of certain risks,” says Dan Scansaroli, co-head of investment management for the Americas at UBS. “But they also realize that to grow your assets, you’re going to have to take on some substantial risk that won’t be under your control.”
The UBS report found that 60% of family offices are planning to make changes to their asset allocation in the next year, more than double the share that planned to do so in 2024. A July study by Roland Berger found that private equity is gaining the most traction in family office portfolios, both through funds and direct investment assets.
“Family offices are seeking greater control, longer investment horizons and access to differentiated returns that are less dependent on public market direction,” Weintraub says.
A Focus on Infrastructure and AI
Real estate is the most widely held asset class, but family offices are starting to moderate these allocations amid changing return expectations and the re-evaluation of physical asset locations.
Infrastructure has emerged as the top sector priority, with 70% of family offices planning to invest in the asset class, according to Roland Berger. Family offices are attracted to infrastructure, Weintraub says, for its stable cash flows, inflation linkage, portfolio diversification and exposure to long-term themes such as energy transition, digital infrastructure and transportation modernization. Plus, infrastructure’s long duration may align with family offices’ longer investment horizons.
Artificial intelligence remains a dominant investing theme, shaping investment decisions across many asset classes and sectors, with opportunities largely concentrated in the U.S. But the family offices are starting to become less comfortable having so much of their portfolio focused on one market.
“So families are adding diversification around that [AI] anchor, across regions and currencies, and they are doing it gradually,” says Juan Xavier Sánchez, head of wealth strategy at Activest Wealth Management.
Geographic Diversification
While North American entities traditionally show an 88% home-region bias, per UBS, global peers are shifting out of U.S. dollar-denominated assets and growing their regional allocations to Asia Pacific and Western Europe.
Meanwhile, they are taking a more cautious approach to emerging markets after seeing 25 years of economic growth in China that never translated to strong overall equity returns there. To balance the growth potential of emerging markets with political and regulatory risks, family offices need to take a more nuanced approach to such markets, says Douglas Evans, CIO at Callan Family Office, who recommends investors underwrite governance, cost of capital and shareholder rights at the security level, rather than buying the beta.
“Practically, that means active or targeted exposure over broad EM index products, often accessing EM demand for developed-market-domiciled operators with EM revenue,” Evans adds.
While re-evaluating geographic exposure, family offices must also ensure that the portfolio complements their existing operating risks, rather than replicating them, says Ron Albahary, the CIO of wealth management firm Laird Norton Wetherby. That means considering the family’s total balance sheet, rather than looking at the investment portfolio in isolation.
“If a family has significant exposure to a country or region through its operating business, the liquid portfolio should incorporate uncorrelated macro and regulatory drivers,” Albahary says. “Unfortunately, many families unknowingly compound the same risks across both their business and investment assets.”
Building in Flexibility
Family offices and their advisers are likely to consider liquidity when making decisions about their asset allocation strategies, viewing cash reserves as a means of retaining portfolio resilience amid volatility and to take advantage of opportunities.
“One of the worst outcomes during periods of market stress is being forced to sell quality assets at depressed values simply to meet cash needs,” says Alison Davis, managing director of family office strategies at Bank of America Private Bank. “Cash-flow planning is paramount.”
To decide how much risk they can prudently take, she says, families must understand upcoming capital calls, spending needs, tax obligations, philanthropic commitments and other liquidity demands.
Despite current challenges, more than half of family offices surveyed by Schroders said they were looking for buying opportunities. In this market, those opportunities include not only the potential to purchase securities at a discount, but also to take advantage of tax-loss harvesting within their portfolios.
“The volatility is adding uncertainty and making it more challenging to put capital to work,” Scansaroli, of UBS, says. “But in the alternative space, one of the most attractive strategies to our family clients has been the long/short tax-loss harvesting, since the volatility is creating more opportunity to be more tax efficient, while earnings growth has been resilient and equity markets have continued to advance.”
Tags: Artificial Intelligence, balance sheet, concentration of risk, diversification, Emerging Markets, Family Offices, Geopolitics, Portfolio Construction