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Last week this news service interviewed the private bank about its global survey of family offices” views about investments, the economy, and what holds their attention.
“As we embark on one of the greatest wealth transfers in history,
it is not surprising to see the amount of emphasis on wealth
transfer,” Hannes Hofmann (pictured), head of the global family
office group at Citi Private
Bank, told this publication when asked about the report’s
findings,
as published last week.
“We can see that the focus on fostering family unity and
continuity increases with each generational wealth transfer, and
what we found interesting about the survey results this year, was
that while the next gen wealth transfer was a priority across all
family offices, it was more pressing for third-generation
families (67 per cent) compared to first-generation (56 per
cent).”
This news service interviewed Hofmann on the day the US
Federal Reserve cut interest rates by 50 basis points. With the
shift from cash, as shown by the report, we asked him whether he
thought the period of higher interest rates in changing
allocations had run its course.
“The future path of interest rates is a top concern for survey
respondents, with over half citing it as their number one
concern. As the rate environment continues to evolve, family
offices are moving their cash into investments, with a focus on
public and private equity,” he said. “Our investment guidance in
the current rate environment continues to include diversification
and smart risk-taking that supports families’ long-term view.
Family offices are uniquely capable of making long-term
investments, so we encourage them to avoid sweeping portfolio
alterations based on rate speculations.”
Asked about the optimism over the economic outlook that came out
in the report, Hofmann noted, for example, that when looking at
alternative investments, family offices are also optimistic about
real estate investments.
“Even as interest rates emerged as family offices’ top concern
(according to 52 per cent of respondents), their allocations to
real estate remained the most stable for the second year in a
row,” Hofmann said.
“It is particularly interesting to see how sentiment differs
amongst family offices, depending on where they are based in the
world. If you look at the regional breakdowns, the survey reports
that family offices in Asia-Pacific and Europe, the Middle East
and Africa for example, were the most positive on the outlook for
global developed equities, at 48 per cent and 46 per cent
respectively,” Hofmann continued.
“They were also the most bullish towards direct private equity
(49 per cent and 53 per cent) and private equity funds (48 per
cent and 43 per cent). This differed from those surveyed in Latin
America, where they were most keen on investment grade fixed
income,” he said.
Hofmann, who has been at the US bank since September 2022,
brings decades of experience to the role; before that, he was at
JP Morgan where he spent more than 20 years. Most
recently, he was the head of multi-family office and
intermediaries in the Asia-Pacific, Europe, Middle East & Africa,
and Latin America regions.
Geopolitics is undeniably front of mind for many family offices,
he said.
“It’s no secret we are living in a complicated time when it comes
to the geopolitical environment. And family offices see this as a
risk they feel most unprepared for today – especially as they
become global entities,” Hofmann said.
“Our survey revealed that 71 per cent of family offices were
international, with assets or family members located across
different countries. To mitigate potential global conflict, we
advise our clients to adopt a principal-driven approach that can
help them navigate in the landscape in the way that a formal
investment office might.
“However, as mentioned earlier, family offices are optimistic
about the investment outlook despite these geopolitical concerns
– evidenced by their positive portfolio positioning,” he
said.
AI enthusiasm
With artificial intelligence inevitably making an appearance
in the report, this news service asked Hofmann about
what the Citi Private Bank survey had to say about it.
“Family offices have increasingly invested in AI, with half of
our survey respondents reporting investments in public or private
equities and another quarter actively considering it,” he
said.
“It is interesting to note that AI shows a higher investment rate
to that of cryptocurrencies and ESG, for example. However,
when it comes to embracing the technology from an operational
perspective, it’s true that adoption is lagging. This mirrors
much of the broader business environment today, where AI
investments and usage are often at a divide,” Hofmann added.
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