While other investors have been
That's the conclusion of a new study by Goldman Sachs, its second edition of the "Eyes on the Horizon"
These investors "are not sitting on cash in 2023," the Wall Street bank said in a press release. "Looking ahead to the next 12 months, they instead are risk-on." Respondents showed high interest in public and private equity and strong interest in alternatives and blockchain, but cooled on cryptocurrencies amid the ongoing crypto winter.
Family offices, which are essentially investment firms that manage the wealth and money of an ultrahigh net worth family and are owned and controlled by that family, are
The Wall Street megabank, which is eager to lean on a wealth management unit that's been a
In a call with reporters Thursday, executives at the bank from its private wealth management business and groups that help venture capitalists and advise tech companies presented the study and shared how it would further the aims of that "One Goldman Sachs" initiative — a
"What we found with sophisticated family offices is, many of them have needs across all parts of our firm," Ken Hirsch, co-head of the One Goldman Sachs family office initiative in the Americas, said on the call. At Goldman, Kirsch is also the co-chairman of the Global Technology, Media and Telecom (TMT) Group, and head of the Venture Capital Coverage Group.
That could mean referring a family office client to the investment bank if they wanted to raise capital for their business or referring the client to the global markets division for help managing risks in complex cross-border transactions, Hirsch said. "We have the ability through the One GS program to understand the types of opportunities and the types of exposures that various family offices want to be exposed to so that we can best bring together solutions for all parties involved."
It could also mean helping multigenerational families manage succession and legacy planning, Sara Naison-Tarajano, the global head of Goldman Sachs Apex and Private Wealth Management Capital Markets, said on the call. "We just see it as an increasingly important client base," she said, calling the family office market "extremely important" to the entire firm.
"Financial advisors who work with these clients should think holistically about the family across their entire organization — that includes their family members, family office, operating businesses, portfolio companies, funds, and philanthropic endeavors," a spokesperson for the firm said in an email about the study results.
Overall, 35% of respondents plan to decrease their cash allocations going forward, excluding U.S. Treasuries. Nearly half, 48%, plan to buy more public stocks, and 41% are planning to invest more in private equity — the top asset classes of interest to this group. And 60% of those interested in sustainable investing plan to invest in clean energy, reflecting the spike of interest in clean energy investing following the passage of Biden's landmark climate bill.
"Despite the volatility and the challenges over the last year, this cohort of investors has really remained notably calm," Meena Flynn, co-head of Global Private Wealth Management at Goldman, said on the call. "They can bear more illiquidity and more risk than other investors. And quite frankly, they just don't have to report to anybody else other than themselves. … they can zig while others zag."
Other asset classes where the sampled family offices expect to invest more include fixed income for 39% of respondents, private credit for 30% and private real estate and infrastructure for 27%. Among sectors, information technology and healthcare were the top two industries respondents were overweight in, reflecting a focus on stable long-term investments.
The family office respondents will remain heavily invested in alternatives — where Goldman is
Collectibles in particular are of interest to family offices with 38% investing in them — the most popular type being fine art, with 27% naming it as an investment asset, followed by wine and aircraft. And 19% of the family office respondents, apparently loving to congratulate themselves on their purchasing power, said they liked having "trophies."
In addition, the super rich at these family offices are planning to increase their presence as landlords for the global masses. Around one-third of them said they would grow exposure to residential real estate investing, and another 30% plan to maintain existing exposure.
Finally, as interest rate hikes
Notably, while many family offices had increased their exposure to cryptocurrencies with 26% investing — up from 16% in 2021 — interest in cryptocurrencies has declined. Whereas two years ago 45% of them were interested, now only 12% are interested in cryptocurrencies going forward. A majority, 62%, have no interest and no plans to invest in that sector going forward. However, digital assets at large and blockchain projects are still of interest — with 32% of respondents investing.
The study polled 166 institutional family offices from around the world through an emailed survey from January 17 to February 13 this year. The respondents were all "family office decision makers that Goldman Sachs serves across divisions," a company spokesperson said in an email. Over half of those family offices, or 95, are based in the Americas, with 34 in Europe, the Middle East and Africa, and 37 coming from the Asia-Pacific region.
A vast majority of them were billionaire units, with 72% reporting a total net worth of at least $1 billion, and 93% were worth at least $500 million. Thirteen percent had net worths of $10 billion or more.
Just under half of all respondents, 48%, were family offices whose founder or "beneficial owner" was the original person in the family who had created the wealth — the other 52% were owned or created by family members from the second generation or later. A majority of them were small operations — 88% reported an investing team of less than 11 employees, and for 73%, their operational team had less than 11 employees.
Generally, the findings were in line with other trends experts in the family office space have seen, according to Joe Reilly, the CEO and founder of Circulus Group in Greenwich, Connecticut. Reilly has been a longtime advisor in the family office sphere.
However, because many family offices prefer to avoid public attention and operate in secrecy, a common challenge of many studies on this market is "the sample sizes tend to be really small," Reilly said in an interview.
The Goldman study is "no exception" in that regard, he said, adding that older multigenerational family offices are usually "far more conservative than what they're talking about here" and likely to have less interest in public market equities than depicted here.
In addition, Reilly said, family offices are different from other big investors like hedge funds in that their cash might be needed for many more forms of spending.
"They have to pay bills. They have to have tax reserves. They have capital calls. They have working capital for their operating businesses. They have payrolls. They pay rent ... and they have to pay off trust distributions," Reilly said. "So this big cash position is not necessarily something you think of as dry powder. It might already be earmarked for something."
