Family Offices Boost China Allocations by 3% as Global Wealth Hits Record High

UBS Group recently conducted a global survey of family offices, with 317 participants from major countries and regions, including the United States, Latin America, Switzerland, Europe, the Middle East, and the Asia-Pacific region. The Asia-Pacific region had the second-largest number of participants, with 73 family offices, accounting for more than a quarter of the total sample.

The total wealth covered in this year's survey reached a new historical high. The average net worth of the surveyed families was 2.7 billion dollars, with a combined total net worth of 651 billion dollars. The average assets managed by family offices were 1.1 billion dollars, while the total private wealth managed by family offices was 283.9 billion dollars. Since 2020, the total net worth of global family offices has been on an upward trend.

UBS noted that family office investors, as mature investment entities, tend to ignore short-term market disturbances and focus more on achieving long-term investment goals. Most family offices aim to achieve long-term growth and higher returns for their investment portfolios while enhancing diversification.

In traditional asset categories, family offices are continuously reducing their cash holdings. By 2025, the planned cash holding ratio is expected to be only 6%. Due to the low returns on cash, family offices hope to achieve wealth preservation and appreciation goals by allocating more funds to global assets, with a current focus on equity assets in developed markets.

In alternative assets, family offices are generally increasing their investments in private debt to enhance returns and strengthen portfolio diversification. Looking ahead to the next five years, equities in developed markets remain the most popular asset type, with 48% of Asia-Pacific family offices planning to increase their holdings in developed market equities, and 40% planning to increase their holdings in emerging market equities.

The allocation of alternative assets is on a continuous upward trend. Family offices are expanding their private equity investments through direct investments, funds, and funds of funds (FOFs), and there is also a trend towards increasing investments in private debt and infrastructure. Additionally, about one-third of family offices plan to increase their allocations to gold and precious metals. This trend is particularly prominent in the Asia-Pacific and Middle East regions, where 33% of family offices in both regions plan to increase their gold holdings, making them the two regions with the highest global proportions.

Family offices' primary assets are still concentrated in North America and Western Europe, accounting for about 80% of total assets. These regions are preferred due to their stable long-term returns and cost-effectiveness.

Global family offices are increasingly interested in investing in China. Nineteen percent of global family offices plan to increase their allocations to this region, up 3 percentage points from 2024. In the Asia-Pacific region, this proportion is 30%, an increase of 6 percentage points year-on-year. Middle Eastern family offices show the strongest interest in China, with 45% planning to increase their allocations over the next five years, the highest among all regions.

Previously underallocated institutional funds have flowed into the Chinese market through mechanisms such as QFII, reflecting a trend of rising market confidence. In terms of emerging markets, China and India are the most favored investment destinations for global family offices in the next 12 months. Thirty-nine percent of Asia-Pacific family offices plan to increase their holdings in mainland China assets within the next year.

In terms of investment strategies, family offices generally prefer active management. Data shows that 78% of Asia-Pacific family offices use active investment strategies, including stock picking and targeted investments in specific industries or regions. In the new technology investment field, surveyed family offices have a high level of interest in pharmaceuticals, healthcare, electrification, and artificial intelligence. In the Asia-Pacific region, nearly one-third of family offices already have clear investment directions or strategies in the pharmaceutical and generative AI sectors.

Artificial intelligence is widely believed to significantly benefit the banking and financial services industries by helping to reduce costs and improve efficiency. Additionally, the application of AI in drug development is also highly regarded, benefiting biotechnology and pharmaceutical companies. In terms of sustainable and impact investing, global family offices tend to address the root causes of social problems through strategic philanthropy and impact investing, seeking long-term impact rather than short-term donations. Education is one of their key focus areas. Globally, 44% of family offices support education development through charitable means, with the proportion in the Asia-Pacific region being 30%.

Medical technology and innovation are also widely recognized as long-term investment areas. In the Asia-Pacific region, 61% of family offices have supported medical technology and care-related projects through investments. In response to these potential risks, family offices typically adopt diversified investment strategies. Forty percent of family offices use active management and hire professional investment managers to disperse risks. Nearly one-third of family offices introduce hedge funds as a tool to cope with market volatility. Additionally, some family offices enhance their portfolio's risk resistance by increasing non-liquid assets (such as infrastructure and real estate), high-quality fixed-income assets, and gold and precious metals.