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B. G., Opalesque Geneva:

Family offices are reducing fixed income allocations and increasing investments in private equity, real estate, and private debt, sacrificing liquidity for returns, according to a recent report by UBS.

Family offices globally are in a new era of strategic asset allocation (SAA) as high inflation, central bank liquidity and rising interest rates compel them to review their investment options, the report says.

42% plan to increase direct private equity allocations, while 38% intend to raise investments in private equity funds and funds of funds. Real estate is favoured by 37%, while 27% are turning to private debt. A third of the average family office portfolio was allocated to equities in 2021, 15% to fixed income, 12% to real estate, and 2% to private debt.

Private equity has continued its steady rise, from a 16% average allocation in 2019 (including funds and direct investments) to 21% in 2021.

Over the next five years, almost a third of family offices plan to decrease investments in developed market fixed income.

"Family offices are keeping pace with a period of substantial transformation. In response to the COVID-19 pandemic, digital disruption and now a war in Ukraine, they are reviewing their options with greater urgency, as a strategic shift towards additional sources of return and alternative diversifiers gains ground," said Joe Stadler, executive vice chairman at UBS Global Wealth Management. "Against challenging ma......................

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