American Family Offices Double Down: A Risky Gamble or Calculated Masterstroke?

The Curious Case of the American Family Office

Here we observe in their natural habitat the American family office. These are not your average investors; these are the custodians of vast fortunes the navigators of complex financial landscapes. And what are they doing amidst the swirling gales of global economic uncertainty? Why they're doubling down on America of course! A recent UBS report reveals that U.S. family offices have increased their allocation to North American assets from 74% in 2020 to a staggering 86% in the first quarter of this year. Extraordinary! As I always say 'An understanding of the natural world and what's in it is a source of not only a great curiosity but great fulfilment.' And frankly I am most curious about what they are possibly thinking.

Home is Where the Money Is?

Now one might ask 'Why?' Why when the headlines scream of trade wars and ballooning debt would these astute investors pour more of their wealth into the American market? According to John Mathews of UBS it's a matter of familiarity. 'In times of uncertainty you invest in things you understand.' A perfectly reasonable explanation wouldn't you say? Like a penguin returning to its rookery these family offices seek solace in the familiar. One almost expects them to start wearing 'I Heart America' t shirts. Almost.

A Glimpse Into the Wallets of the 1%

These aren't chaps with just a few quid in their pockets mind you. The families surveyed boast an average net worth of $2.7 billion with each family office managing a cool $1.1 billion. That's enough to make even a blue whale blush. With that kind of capital one can afford to be a little... patriotic shall we say? It's a world away from the shoals of herring – a different ecosystem entirely.

The Global Perspective: An American Anomaly

Interestingly this 'America First' approach is not universally shared. While international family offices allocate a significant portion of their assets to North America none display the same level of home bias as their American counterparts. Latin American family offices come the closest with 64% of their assets in North America. But still it's a far cry from the 86% of the American families. It seems America truly is a land of opportunity. Or at least a land of perceived opportunity for those who already have a rather large pile of it.

Stocks: The Darling of the Family Office Set

What pray tell are these family offices investing in? Stocks primarily. They're ramping up their exposure to both developed and emerging markets seeing public companies as a gateway to the ever so trendy worlds of artificial intelligence power generation and healthcare. 'The U.S. has the deepest most conservative markets in the world,' says Mathews. Conservative eh? One wonders if that's entirely a compliment in this day and age. But who am I to judge? I'm just a humble observer much like that dung beetle relentlessly pushing its ball of... well you get the picture.

Farewell Private Equity (For Now)

And what of private equity that once beloved asset class? Ah it seems the tide is turning. After years of increasing their allocations family offices are now trimming their private equity holdings. Perhaps they've simply had their fill of illiquid assets or perhaps they're waiting for the right moment to pounce again. As Mathews puts it 'They're waiting for those exits and they've been delayed. I think they're just being more selective but when they see the right one they typically go all in.' Like a lion patiently stalking its prey. Or perhaps a chameleon changing its colors to blend in with the ever shifting financial landscape. One never knows with these creatures.