Tech investments, particularly in healthcare also on the rise, RBC and Campden Wealth Survey finds
TORONTO (Nov. 16, 2022) – North American family offices were well poised to ride out the economic turbulence of 2022. More than half grew their assets under management (AUM) in the year leading up to the downturn, despite concerns about inflation and succession planning, according to a study by RBC and Campden Wealth.
More than three-quarters of families surveyed saw their wealth rise in 2022. The collective AUM across North American family offices was estimated at US$182 billion. The average family represented from North America had wealth of US$2 billion.
Next Gens’ influence continued to grow and drove more family offices to participate in sustainable investing. In 2022, 37% of North American family offices engaged in sustainable investing, up from 34% last year and 26% in 2019.
The proportion of their portfolios dedicated to sustainable investing has also increased over the years. In 2020, the family offices in North America who engaged in sustainable investing dedicated an average of 16% of their portfolios to sustainable investments. This grew to 20% in 2022, and is expected to rise to 31% in five years’ time. The most popular sustainable investing theme was climate change, with 77% reporting they invest in climate change mitigation. Other areas of focus included investing in improving fresh water supply and managing water consumption (53%), strengthening health and social care (49%) and reducing pollution/waste (47%).
“As we stand at the center of the multi-trillion dollar transition to the next generation, we are clearly starting to see their influence,” said Mark Fell, Head of Family Office and Strategic Clients, RBC. “We are proud to help family offices realize their ambitions present and future, informed by the insights of this year’s North America Family Office Report. We thank the many families we work with who contributed their perspectives to the report.”
Research firm Cerulli Associates projects that overall wealth transferred between 2021 and 2045 will total $84.4 trillion.
For North American family offices, 30% of Next Gens have already assumed control of their families’ operations – with another 27% expected to do so within the next decade. However, only 33% of family offices have a succession plan in place for senior leaders and 40% feel they do not have a next generation member qualified enough to take over.
“It’s essential to have important conversations about the family’s goals and values with the next generation to help preserve the family’s wealth and legacy for future,” said Angie O’Leary, Head of Wealth Planning at RBC Wealth Management. “A succession plan is a must to adequately prepare the next generation to inherit wealth, and it must be revisited often to ensure it reflects a family’s changing needs, priorities and vision.”
The pandemic and an aging population made healthcare an attractive space for investors. Three in four family offices invested in healthcare this year and 39% plan on increasing their investment in 2023.
Biotech, which 62% of North American family offices invested in, was the second most popular technology for investment, followed by fintech (59%), digital technology (52%) and green tech (50%).
Looking to 2023, outside of healthcare, the areas most likely to see a rise in allocations are artificial intelligence, with 40% of those invested there planning to increase their allocations, green tech (35%) and biotech (34%).
A notable 81% of those surveyed cited investment risk as the number one threat to family offices and, consequently, more shifted away from a growth approach to a more balanced investment strategy. This year, 51% of family offices employed a balanced strategy compared to 47% in 2021.
To help mitigate inflation effects, family offices have leaned into private equity, real estate and commodities over the year. This trend is likely to persist as 46% said they would allocate more to private equity funds and 41% to direct investments in 2023, with 35% planning to allocate more specifically to venture capital and 34% to private debt/direct lending. Another 41% plan on allocating more to real estate.
North American family offices outperformed their peers with an average portfolio return of 15% in 2022 compared to 13% in Europe, 10% in Asia-Pacific and a 13% global average. This performance is largely attributed to strong gains within private equity. Venture capital stole the show, with an average return of 26%, followed by private equity funds and direct private equity at 22% and 21% respectively.
“Family offices’ view of the economic climate has soured over the year amid sharp rises in inflation and interest rates. With that said, their investment performance has been strong in recent years, despite the pandemic. This shows that family offices are well-poised to tackle turbulent economic conditions,” said Dr. Rebecca Gooch, Senior Director of Research at Campden Wealth. “They are nimble investors with ample cash reserves, diverse portfolios and a long-term outlook, thus they’re able to ride economic waves while also capitalizing on opportunistic deals.”
The results noted above can be found within The North America Family Office Report 2022.
The data for this series was collected between March and July 2022. This data includes a survey that was completed by 382 family offices worldwide, with 179 (47%) being from North America. In-depth interviews were also conducted with 32 family office executives, with 15 of these being from North America. Single and private, not commercial, multi-family offices were included in the analysis this year. The report defines multi-family offices as entities that serve no more than eight families and whose core family holds at least 50% of the family office’s total AUM.
Please click here to download the full report.
Past performance is not a guarantee of future results.
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Campden Wealth is a family-owned, global membership organization providing education, connectivity, research and networking opportunities to families of significant wealth, supporting their critical decisions, helping to achieve enduring success for their enterprises and family offices, and preserving their family legacy.
Campden Research supplies market insight on key sector issues for its client community and their advisers and suppliers. Through in-depth studies and comprehensive methodologies, Campden Research provides unique proprietary data and analysis based on primary sources.
Campden Wealth owns the Campden Club, a private, qualified and invitation-only members club representing multi-generational business owning families, family offices and private investors across 39 countries, and the Institute for Private Investors (IPI), the pre-eminent membership network for private investors in North America. Campden further enhanced its international reach with the establishment of Campden Family Connect PVT. Ltd., a joint venture with the Patni family in Mumbai in 2015.
For more information: www.campdenwealth.com Enquiries: research@campdenwealth.com
Securities offered through RBC Wealth Management. RBC Wealth Management is not affiliated with Campden Wealth.
RBC: Greg Skinner, RBC Wealth Management Canada, (416) 294-5579, greg.skinner@rbc.com Megan Boldt, RBC Wealth Management US, (651) 245-9153, megan.boldt@rbc.com
Campden Wealth: Dr. Rebecca Gooch, Senior Director of Research, Campden Wealth, +44 (0) 7771 917076, rebeccagooch@campdenwealth.com
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