Shift in Risk Appetite: Asia’s Family Offices Diverge from Global Trend, Citi Survey Reveals

A recent survey conducted by Citi Private Bank indicates a noteworthy departure in risk appetite among family offices in Asia compared to their global counterparts. Despite a general trend of shifting from cash to risk assets observed globally, Asian family offices appear to be bucking this trend, maintaining a relatively higher risk appetite.

The survey, conducted in the third quarter of the year, encompassed Citi Private Bank’s family office clients with a collective net worth of $565 billion. Notably, two-thirds of the participants hailed from regions outside North America, providing a diverse and comprehensive view of global family office sentiments.

Unlike traditional wealth managers, family offices cater exclusively to high-net-worth individuals, offering specialized advisory services. According to Hannes Hofmann of Citi Private Bank, Asian family offices exhibited a more substantial allocation of funds into risky assets compared to low-risk assets in the first half of the year. Hofmann emphasized that the current environment poses challenges for these offices to further increase their risk exposure.

Approximately 44% of assets held by Asian family offices were invested in private and public equity, while 30% to 33% remained in cash and fixed income, as reported by Citi’s Hofmann. This distribution represents a significantly larger gap compared to family offices in the U.S., Europe, and Latin America.

Several factors contribute to the comparatively heightened risk appetite of Asian family offices. The historically low interest rate environment, coupled with bets on China’s post-COVID recovery (though facing recent setbacks), played a role. Additionally, the potential slowdown in China and disruptions in global supply chains left a strong impact on the portfolio allocation strategies of Asian family offices.

The relative underperformance of equity markets in Asia throughout the year, in contrast to the U.S. and Europe, is identified as another contributing factor to the observed divergence. As global trends continue to evolve, the unique dynamics influencing Asian family offices suggest a nuanced approach to risk management and asset allocation in the region. Market participants will closely monitor these developments as Asia’s family offices navigate a distinctive path amid broader global financial shifts.

Financial Desk