2023 Unfolding: family offices thrive with sustainable investments and resilient strategies

The financial landscape has been tumultuous, with the year 2022 presenting challenges for money managers worldwide.

However, amidst the uncertainty, family offices have emerged as resilient entities, demonstrating their ability to preserve and grow capital even in volatile conditions. The popularity of family offices is on the rise as wealthy individuals increasingly seek greater control over their finances and investments.

Outperforming turbulent times

According to a report from Campden Wealth, family offices outperformed their global peers in 2022. North American family offices, in particular, recorded an average portfolio return of 15%, compared to 13% in Europe and 10% in Asia-Pacific. Such exceptional performance can be attributed to the nimbleness of family offices, which possess cash reserves and ‘patient’ capital, allowing them to swiftly respond to economic changes and capitalise on opportunistic deals thrown up by market volatility.

Diversifying assets allocation in uncertain times

As we move further into 2023, family offices face new challenges and trends in the financial landscape. The uncertainty surrounding global economic growth, inflation, and interest rates has led family offices to diversify their asset allocation.

While public equities remain a significant allocation, family offices are increasingly turning to private equity, real estate, and illiquid assets like private debt to seek returns uncorrelated with equities. A study by Aegon found that around nine-in-ten family offices expect to increase their exposure to illiquid assets over the next two years, as they offer an illiquidity premium and shield investors from macro uncertainty.

Next Generation embracing sustainable investments

Notably, family offices are also embracing sustainable investments driven by the younger generation’s values. Aeon Investments revealed that nearly 40% of family-office executives strongly agree that younger family members are driving increased interest in sustainable investment. This shift towards sustainable investing is attributed to the succession of wealth from current holders to their children, with the next generation caring more about the impact of their investments on environmental and social causes.

While family offices embrace new investment approaches, they are also mindful of the potential risks involved. Around 77% of global family offices believe that investment risk is the most significant challenge they face over the next three-to-five years. In response, many family offices are seeking external providers to incorporate exposure, risk contribution, and liquidity analysis into their portfolio analysis, placing greater emphasis on risk management.

The growing influence of family offices

The growing influence of family offices in financial markets is expected to continue, driven by a massive transfer of wealth across generations, advancements in technology, and the rapid growth of Asian economies. Family offices are becoming increasingly prominent players, extending their reach beyond traditional conservative investments. Moreover, these entities are proactively addressing challenges, including the need to upgrade technology, tackle cybersecurity threats, attract talent in a competitive environment, and manage major generational transitions where trillions of dollars are changing hands worldwide.

As 2023 continues to unfold, family offices are positioning themselves to thrive in the face of uncertainty. Their focus on sustainable investments, resilient strategies, and adaptability to market dynamics set the stage for continued success and solidify their role as influential players in the financial world.

About the author:

Georgina Murrin is a ESG Analyst in Itriom’s London Office.

About Itriom

Itriom is the global impact platform helping leading families shape a better world.  Itriom’s platform enables families to refresh and redesign their values, aligns them with the right UN Sustainable Development Goals, combining them in an agreed purpose and a Family Impact Charter.  Itriom’s platform supports the development of impact initiatives and whilst providing discrete and secure spaces for peer-to-peer messaging and collaboration. Itriom’s core practices in Leadership, Geostrategy, and Sustainability benefit clients by developing strategies to engage and support the Next Generation in building a lasting legacy of which families can be proud. 

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Alizah Beg

ESG Consultant

Alizah is an ESG Consultant and researcher. She supports Itriom developing sustainability related products and services, helping our clients identify potential opportunities for creating positive environmental, social and sustainable impact.

Georgina Murrin

ESG Analyst

Georgie is an ESG Analyst and researcher. She researches trends, develops insights and reports, and writes insight articles on sustainability and ESG related topics to ensure Itriom’s clients are up to date on the latest policy, progress and initiatives to inform the platform and help our clients maximise their positive impact.

Tim Boughton

Senior Partner
Practice Leader – Leadership & Resilience

Renowned family office thought leader, Tim works with UHNW families to ensure they are fully equipped to deliver their legacies inter-generationally and effectively.

Dr. Herb Castillo

Associate Partner
Practice Leader – Sustainability

Dr. Herb creates methodologies and frameworks for managing, measuring and assessing sustainability performance. His work identifies where maximum impact can be made.

Simon Hulland-Lucas

Senior Partner
Practice Leader – Geostrategy

Simon harnesses research, liaison and networks globally to identify opportunities for Itriom, building the knowledge needed to deliver intergeneration legacies for UHNW families.

Matthew Millard-Beer

Managing Partner
Practice Leader – Strategy

Matthew is Founder & CEO of Itriom, providing solutions and a global platform for Ultra High Net Worth Principals and their families to engage in unifying purpose, enduring legacy, and sustainable impact.