Major Shift in Global Investment Strategies

A new survey by UBS reveals a significant shift in investment strategies among the world’s wealthiest families. Fully 60% of family offices plan to make strategic changes to their investment allocation in the next year, more than twice the level of the past five years.

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The main driver behind this shift is the increasing complexity and uncertainty of the global economic landscape. Fears of an AI bubble, tariffs, a falling dollar, volatile economic policies, and rising debt and bond yields have led many family offices to dial back their U.S. exposure and spread their investments across the globe.

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Reducing U.S. Dollar Exposure

The trend of reducing U.S. dollar exposure, or ‘de-dollarization,’ is gaining momentum. More than a quarter of family offices plan to lower their holdings of U.S. dollar-denominated assets, and two-thirds of family offices expect confidence in the U.S. dollar’s reserve role to fall. Nearly half of family offices also believe they are overexposed to the dollar.

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The Swiss franc and the euro are the preferred currencies for diversification, according to the survey. Family offices are looking to reduce their cash holdings and real estate investments, while adding to emerging market equities, infrastructure, and gold investments.

Geopolitical Uncertainty Tops Risk List

Geopolitical uncertainty is the top risk facing family offices in the next 12 months, and it is expected to remain a significant concern over the next five years. A global trade war, hyperinflation, cyberattacks, and debt crises are also high on the list of risks.

Family offices are adapting to these changing circumstances by implementing jurisdictional diversification strategies. Two-thirds of family offices now have their bankable assets in at least three jurisdictions, and nearly a third have them in at least four jurisdictions.

U.S. Family Offices Take a Different Approach

Interestingly, U.S. family offices are taking a different approach. They are happy to stay concentrated at home, with 88% of their assets invested in the U.S. on average. This is a significant increase from last year, when the average was 86%.

North America accounts for the bulk of global family investments, with 53% of all global family assets invested in the region. However, non-U.S. family offices are bringing more money back to their home countries or to other non-U.S. markets.

The survey highlights a growing divergence between family offices in the U.S. and those overseas. While U.S. family offices are doubling down on their U.S. investments, international family offices are diversifying out of the dollar-denominated securities and the U.S. a little bit.

Preparing for an Extended Period of Elevated Risk

The survey emphasizes the need for family offices to prepare for an extended period of elevated and interconnected risk. The forces driving this shift include geopolitical uncertainty, global debt, and interest rates. Family offices are looking to build resilience across a broader and more complex risk landscape, combining adjustments to their asset allocation with multishoring strategies.

The new catchphrase in family office investing is ‘jurisdictional diversification,’ spreading money in multiple countries to hedge risk. Family offices are taking a proactive approach to managing risk, and it is essential to stay ahead of the curve in today’s complex and uncertain global economic landscape.