Wealthy Families Are Ditching Cash for Riskier Wagers

The world’s wealthy are getting frisky. Family offices are moving out of cash and into riskier equity investments as outlooks for global markets improve and interest rates come down.

Money managers made significant portfolio shifts this year, with more than 4 in 10 managers upping their exposure to public and private equity, according to Citigroup research. Almost the same percentage of respondents slashed their holdings in cash. As the Federal Reserve rate cut cycle begins, nearly all of the 338 family offices surveyed (97%) believe the markets will post positive returns over the next year. It’s a major shift in thinking from some of the most lucrative managers on the planet. 

“Family offices are shaking things up,” said Dutch Mendenhall, CEO of the alternative and real estate investing firm RADD Companies. “It’s a wake-up call for family offices to rethink their game plans.”

All In the Family Office 

Family offices provide the richest investors with ways to maximize intergenerational wealth, like legal and tax advice, estate planning, and concierge services that can even include dog walking. The ultra-high-net-worth segment — investors with more than $30 million in assets — make up 1% of the global population but hold a staggering 34% of the world’s wealth.

Family offices are big business for wealth managers. Assets are expected to rise 73% to $5.4 trillion globally by 2030, according to a Deloitte report. That’s in line with the wealth of ultra-rich families with their own investment offices, which is expected to top $9.5 trillion over the same time frame — a 189% increase from 2019.

Modern Family. Family offices are also experimenting with growth equity, venture capital, and AI, often betting on early funding rounds that come with higher stakes but potentially bigger payoffs, Mendenhall told The Daily Upside. Almost half of the firms surveyed have ramped up their fixed-income investments. “This is a big pivot aimed at snagging higher returns in a post-pandemic society,” he added.

The managers are also building exposure to AI. Half of those surveyed report investments in public or private AI firms, which was likely a major driver in the positive returns this year, according to the report. 

• Private credit, emerging-market debt, and art are falling out of favor, according to the survey. 
• Interest rates, relations between the US and China, and overheated market prices were top economic concerns.

“Family offices realize old-school investments just won’t cut it to preserve wealth long-term,” Mendenhall said.