Wealthy families more bullish on risk assets, according to recent survey

Wealthy families are seeking out risky assets and reducing cash holdings as they turn more bullish about the investment outlook, according to a Citigroup (C.N) survey.

About 97 per cent of the 338 family offices surveyed by Citi’s private bank expect their investment returns to be positive over the next 12 months, rising from 95 per cent of respondents last year.

“Investors are very optimistic, and we see that even in the kind of risk they are taking,” said Hannes Hofmann, head of Citi’s global family office group. He cited wealthy families’ direct investments in companies during initial funding rounds, which are typically more risky than the later rounds.

Growth equity and venture capital investments also comprised a large share of family office allocations in private equity funds, Hofmann said.

Meanwhile, the path of interest rates was the top concern for more than half of the respondents, overtaking inflation as the biggest worry for the first time since 2021.

More than three quarters of investors surveyed made money last year, compared with 12 per cent of those who lost money and 10 per cent whose portfolios were flat, the survey showed.

Families have been gradually reducing their cash positions and adding riskier assets.

Higher yields boosted the appeal of fixed income investments, spurring 49 per cent of respondents to boost their allocations. Meanwhile, 43 per cent raised allocations in stocks and 42 per cent added private equity.

More than half of the wealthy families surveyed had investments in generative artificial intelligence (AI), but less than 15 per cent had deployed AI in their own operations.

“Investors know it will become important, but are not very sure of how to use it for their own investing purposes,” Hofmann said.