Family offices shift towards fixed income amid economic uncertainties

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Family offices shift towards fixed income amid economic uncertainties
Credit: © Reuters.

In a significant shift in investment strategy, family offices are moving towards a more conservative approach amid a challenging economic environment, according to a survey conducted by Citigroup (NYSE: C ). The survey encompassed 268 family offices, which collectively control over $1 trillion in assets.

The findings, revealed on Wednesday, showed that family offices have reduced their exposure to equities while increasing their allocations in fixed income. This marks the most substantial change in family office positioning since 2020. More than half of the surveyed entities have increased their fixed income allocations, with these offices controlling a cumulative total of $568 billion in assets.

Currently, the average family office has 16% in fixed income, 12% in cash, and 22% in equities. Within these allocations, there is a clear focus on less risky areas. For equities, this translates to companies operating in traditional industries with positive cash flow and attractive valuations. In terms of fixed income, there is a bias towards higher credit quality and shorter duration.

Major concerns driving these changes include inflation fears, anticipation of a hawkish Federal Reserve policy, and rising geopolitical tensions, particularly between the U.S. and China. This cautious approach reflects the broader trend of family offices becoming more conservative in response to these economic uncertainties.

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