Demand for shares rises in Family Offices – Citi Wealth

Demand for shares rises in Family Offices - Citi Wealth

Citi Wealth has just published its family office investment report for the first quarter of 2024, which provides a snapshot of how Citi Private Bank’s single family office clients are positioned and provides insight into regional flows across Asia Pacific, Europe, the Central -East and Africa. Latin America and North America.

A new report from Citi Wealth shows that global investors’ risk appetite increased in the first quarter of 2024. Sentiment was bolstered by growing evidence of US economic resilience and recovery in global demand.

While hopes for an early cut in US interest rates have been dashed, expectations of cuts later this year remain. Elsewhere, such as in Europe, monetary policy could be eased sooner, the report shows. Against this backdrop, family offices have reduced their cash positions. Stocks continued to rise in much of the world. Developed markets have seen the best of the action. The US, Europe and Japan all enjoyed double-digit increases during the period. The report shows that emerging markets have made more modest gains, with Latin America the only region to have pulled back.

The focus has been on developed large cap stocks, despite the high valuations of many US technology stocks such as the “Magnificent Seven”, i.e. Amazon, Apple, Google parent Alphabet, Meta Platforms, Microsoft, Nvidia and Tesla. Developed small and mid-cap stocks also rose in all parts of the world, according to the report.

The analysis is based on investment assets of individual family office clients at Citi Private Bank. Citi Private Bank’s global family office group considers one family office to have a net worth of $250 million. Data is collected from more than 1,200 single family office clients worldwide and filtered by size and allocation characteristics.

In particular, the report shows that Europe, the Middle East and Africa had the largest equal-weighted rise in equities of any region, with developed large caps accounting for around 61 percent of total equity trading volume. Emerging markets also saw net dollar inflows thanks to concentrated flows into Indian banks, while allocations to developed small- and mid-caps increased against the backdrop of historically low valuations.

Meanwhile, family offices in the Asia-Pacific region increased their equity and fixed income investments on average, while those with larger portfolios increased their allocation to the former region but remained flat in the latter.

In North America, the average client (on an equal-weighted basis) reduced equity exposure, while clients with large portfolios (on a capital-weighted basis) typically increased their positions, driven by US large-cap stocks. US small- and mid-cap equity allocations also rose, thanks to historically low valuations.

Mabrouk Chetouane, head of global market strategy at Natixis Investment Managers Solutions, also favors equities in 2024. “We want to add equities to investors’ portfolios,” Chetouane said. He believes the momentum behind stocks at the start of the year is still there. He has decided to maintain his company’s exposure to equities or increase it in some portfolios. See more commentary here.

Fixed income
Fixed income, on the other hand, had a weak start to the year, mainly due to investors pulling back from bets on early US rate cuts. Higher quality corporate and government bonds in developed markets were hardest hit. However, high yield and emerging markets have held up better. The report shows that developed investment grade allocations were again slightly in favor on both an equal-weighted and capital-weighted basis.

Nevertheless, fixed income in Latin America received the largest inflows, while equities lagged behind. On average, investment-grade US bonds were the most popular in Latin America, but for family offices with the largest asset allocations, emerging market bonds were preferred. Equity exposure also increased on both an equal and capital-weighted basis, with US small and mid-cap stocks showing the biggest increase, albeit from low levels.

Within the alternative asset classes, there was an increased allocation to private equity in all regions, while hedge funds generally experienced a reduced allocation. Commodities advanced, thanks to continued momentum in gold and a recovery in oil after last quarter’s losses.

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