The report does not yet cover North America, but findings may be indicative of how single-family offices around the world behave. In the two years to July 2022, larger SFOs gained more assets, although their weightier exposure to stocks meant that they took an outsized hit as markets fell after January.
Size creates its own momentum – at least according to a new Credit Suisse report showing that large single-family offices ($500 million or more in assets) clocked up faster asset growth than medium- and small-sized SFOs over the past two years.
The Credit Suisse SFO Index, based on data from over 300 family offices, found that large offices reported cumulative asset growth of 15.8 per cent as of 29 July 2022, whereas medium-sized SFOs have grown their assets in custody by 8.4 per cent. Small SFOs have returned to their pre-pandemic levels on a cumulative performance basis earning a cumulative 1.7 per cent.
However, a bad year for global markets – with most equity indices reporting double-digit percentage falls – has hit assets at SFOs. Since January through to 29 July, on average SFOs have lost 7.6 per cent of their beneficial owners’ assets in custody at banks, with listed equities (-6.5 per cent) as the main cause of the pain. Alternative investments, including commodities, were the main positive contributor to results, up 0.7 per cent, the Credit Suisse report said.
The average asset allocation on assets in banks’ custody in the Credit Suisse SFO Index is 47 per cent in equities, 29 per cent in bonds, 17 per cent in alternative investments and the rest in multi-asset investment solutions.
The report is one of two issued today by the bank, drawing from respondents in Europe, the Middle East and Asia. And while not including North America, the results might also be indicative of how SFOs in the region behave. The second report, 2022 Single Family Office (SFO) Survey Report, tracked next-gen transfer, investment concerns, and other issues.
The SFO Index also shows that the larger SFOs tend to be more heavily weighted to equities than their counterparts. Large SFOs overall hold 62 per cent in stocks, versus 45 per cent for small family offices. Moreover, large SFOs tend to hold fewer alternative investments in bank custody than small SFOs, as they hold more in direct investments than small SFOs on average.
The heavier weighting to stocks has hit larger SFOs, however, as stocks tanked in 2022. Large SFOs have underperformed compared with small and medium SFOs year-to-date, Credit Suisse said.
Regionally, Asian SFOs outperformed their European and Middle Eastern counterparts on a year-to-date basis.
The Survey Report showed that 53 per cent of respondents found it hard to include the next generation in decision-making and managing the wealth transfer.
In addition, one-quarter (26 per cent) indicated that relationships within the family are a significant business challenge.
Younger family members are often pivoting towards ideas and causes driven by purpose – notably sustainability, innovation and transparency. Yet in some cases, they have no say at all (31 per cent).
A total of 54 per cent of respondents cited investment strategy and asset allocation as one of their top three challenges, while 47 per cent cited achieving annual return targets.
The Credit Suisse Index builds on a database consolidating more than 325 custodians and many active end clients with more than 300 SFOs tiered in three different size groups: small (less than $100 million of assets under management), medium (between $100 million and $500 million of AuM), and large (over $500 million of AUM), spread across Asia Pacific, Europe and the Middle East. In the future, the bank intends to cover the remaining geographies and create a global SFO benchmark index.