European Family Offices Continue to Make Inroads to Economic Recovery

London (9 December 2013)- European family offices are experiencing a resurgence in confidence as the global financial system stabilizes, though single and multi-family offices are finding it difficult to look beyond short-term investment horizons, according to the 6th annual European Family Office Survey published by Campden Research and UBS on 5 November 2013.

Family offices are more positive about the investment environment, with fewer fears over eurozone collapse and central bank support of the global financial system, but remain concerned about wider macro-economic instability and geopolitical issues.  While multi-family offices, in particular, worry about the decoupling of valuations and risk, only 9% think they are “less viable” this year, compared with 25% last year. Notably, while only 15% of SFOs and no MFOs underperformed their benchmarks this year, operational costs continued to increase, partly because of the growth in family wealth management needs and climbing compliance costs.

Single family offices (SFOs) are looking for more growth opportunities, including direct investments, while multi-family offices (MFOs) remain more conservative in their investment objectives and strategic asset allocations. While many family offices still find it difficult to look beyond a 3- to 5- year investment horizon, both SFOs and MFOs intend to increase their allocations to direct venture capital/private equity investment and private equity funds in the near future.

Both confidentiality and controlled and consolidated management of family wealth remain the top two objectives for family offices, by some margin, since the survey began in 2008. It is natural, then, for recruitment and retention of senior staff to persist as a key issue for family offices. Both SFOs and MFOs are likely to outsource more services in the future, as consolidating reporting and risk analysis continues to emerge as priorities. The long-term trend continues toward outsourcing specialist services that are not part of the investment process, such as tax and legal planning, among both single and multi- family offices. However, offices are taking more control of manager selection and oversight, as well as strategic asset allocation decisions.

These were among the findings of a major research study on European family offices undertaken by Campden Research, supported by UBS. The study, entitled, Return to Growth: Family offices plan for a brighter future, surveys the attitudes of a significant cross section of Single Family Offices and Multi Family Offices throughout Europe.

Other key findings include:

·         SFO investment objectives have shifted back to a more balanced investment approach, with 61% of SFOs reporting balanced objectives this year, compared to 39% last year, when they focused more on wealth preservation in a volatile market. MFOs remain less growth driven, as 50% of MFOs have objectives to preserve wealth.

·         53% of MFOs are expanding their operations, taking on more assets and clients and dedicating more resources to meet an increasingly onerous regulatory and compliance environment. Fewer and fewer SFOs identify profit as their primary financial goal.  In 2010, 38% said this; today the figure is 19%.

·         The longer-term trend of outsourcing specialist legal and tax advice is continuing.  For example, in 2008 45% of SFOs provided legal advice in-house.  Today only 16% of SFOs feel confident enough to provide legal advice without significant external specialist input. 18% of MFOs spend more than 50% of their costs on external specialists.  Not a single SFO spends more than 50% on external specialists, but external asset management fees are often paid from the funds rather than recorded as a SFO overhead.

·         The majority of family offices, 70% of SFOs and 57% of MFOs, say they need to generate over 5% real return (after inflation) to preserve family wealth. In 2008, 41% of SFOs thought an office was viable for families with under €100mm.  Today, the corresponding figure is 31%.

·         Asset managers are rated by both SFOs and MFOs as the most important day-to-day external service providers, followed by lawyers and then investment banks for SFOs, and custodians and private banks for MFOs. 72% of SFOs and 83% of MFOs believe that asset managers add value over in-house managers, with “superior depth of experience” being the main reason. Over a fifth of family offices use more than 15 separate firms, while 57% of SFOs and 36% of MFOs use fewer than five.

·         Family offices’ philanthropic strategies are changing.  Instead of using the family office to pursue philanthropic interests, family members are more actively involved outside the family office, giving or investing time and money, either individually, with others or through social funds.

"This year, it is encouraging to celebrate the resilience of European family offices, as they continue to adapt in implementing investment and succession plans, which are so critical to ensuring family legacies,” stated Dominic Samuelson, CEO of Campden Wealth. Samuelson continued, “Results of the study reinforce our considered belief that family offices are not only sustainable but growing stronger. It’s wonderful, then, to see European family offices regain their confidence and, along with their American and Asian counterparts, begin to realign their investment portfolios toward a more balanced, growth-oriented distribution.”

Philip Higson, Head of UBS Global Family Office Europe, added: “Campden's European Family Office 2013 research provides an excellent barometer of the shifting needs, opportunities and expectations of family offices. The most striking aspect of 2013 European Family Office Survey is 'a change in direction to a more confident pro-growth investment stance'. Asset allocation changes since the 2012 survey demonstrate that family offices are part of the 'great rotation' out of Fixed Income and into Equity / Private Equity. Based on the 2013 survey responses, this multi-year trend appears set to continue as substantiated by family office intentions to further reduce fixed income investments, and add to equity, in the next twelve months.”

Higson continued: “Consistent with the Campden 2013 Report, UBS also notes a shift towards equity or equity-like investments at the expense of fixed income, as families accept more market risk in order to reach their goal of inflation adjusted returns of at least 5% per annum. Family offices form an essential bridge between the specific needs of wealthy families and the complex and heterogenous services provided by myriad investment funds, investment advisers, investment banks, custodians and other entities.”

About the report

The report covers sixty-one (forty-two single and nineteen multi-) family offices across Europe in the summer and autumn of 2013. Each of the family offices in this survey has a net worth in excess of €50 million and a significant proportion (36%) own over €1 billion. The survey is now in its sixth year and represents the most comprehensive analysis available on family offices and their attitudes in Europe.

Notes for editors

For more information about the report, please contact:

Andrew Porter

Director of Research, Campden Wealth

+44 (0)20 7214 0544

andrewporter@campdenwealth.com

About UBS

UBS draws on its 150-year heritage to serve private, institutional and corporate clients worldwide, as well as retail clients in Switzerland. Its business strategy is centered on its pre-eminent global wealth management businesses and its leading universal bank in Switzerland. Together with a client-focused Investment Bank and a strong, well-diversified Global Asset Management business, UBS will expand its premier wealth management franchise and drive further growth across the Group. Headquartered in Zurich and Basel, Switzerland, UBS has offices in more than 50 countries, including all major financial centers, and approximately 61,000 employees. UBS AG is the parent company of the UBS Group (Group). Under Swiss company law, UBS AG is organized as an Aktiengesellschaft, a corporation that has issued shares of common stock to investors. The operational structure of the Group comprises the Corporate Center and five business divisions: Wealth Management, Wealth Management Americas, the Investment Bank, Global Asset Management and Retail & Corporate.

In 2010, UBS set-up GFO (Global family Office), which is a 50:50 joint venture between our wealth management and investment banking divisions. GFO Europe, one part of a global team which spans all time zones, has experienced increasing interaction and activity levels with a significant number of family offices in the European region.

 

About Campden Wealth

Campden Wealth is the leading independent provider of information, news and education for generational family business owners and family offices globally in person, in print, via research and online.

Campden Research is a business specially formed to further extend this information offering. Campden Research supplies market insight on key sector issues for its client community and their advisors and suppliers. Through in-depth studies and comprehensive methodologies, Campden Research provides unique and proprietary data and analysis based on primary sources.