North America Family Office Report 2024: Cautious optimism from North American family offices

The unprecedented events of recent years, including the COVID-19 pandemic, the dislocation of global supply chains and wars in Eastern Europe and the Middle East, have disrupted the global economy and produced volatility in financial markets. This uncertainty has led to increased caution among family offices. 

However, in 2024, family offices are reporting more optimistic expectations driven by strong performances in public markets and strategic adjustments implemented in their portfolios.

For example, the most common concern among North American family offices last year was a US recession, but those fears never materialised. Instead, family offices have broadly experienced brisk investment returns thus far in 2024, making it an unexpectedly positive year.

According to “The North America Family Office Report 2024” in partnership with Campden Wealth and RBC, more than 40% of responding family offices expect an investment return higher than 10%, with a weighted average expectation of 11%, in 2024. This outcome would be an increase from the 9% return estimated for 2023 and 1% achieved in 2022.

“Family Offices typically have longer time horizons, investing for the next 50 to 100 years or more. They are presently benefiting from the dual strategies of relatively high exposure to developed market equities which have experienced a buoyant start to the year aligned with receiving the so-called liquidity premium of higher returns for more patient capital and increased exposure to private markets,” says Dominic Samuelson, Chief Executive Officer, Campden Wealth. 

“The North America Family Office Report 2024” explores survey responses from 360 single-family offices and private multi-family offices worldwide, and focuses specifically on the 183 responses from North America. 

Providing insight into the evolving state of family offices, the report found that as optimism increases this year, family offices continue to balance the need for wealth preservation with the pursuit of growth. The report also shows an enduring focus on strategic diversification and interest in investments with potential for high growth.

Better returns

More than half of survey participants (52%) said that the performance of developed market equities in the first half of 2024 was better than they had anticipated 

In the first half of this year, the S&P 500 rose 15%, Nasdaq rose 20% and Europe’s Stoxx 600 rose 7%. For the average family office, developed market equities represent 22% of the portfolio. As a result, brisk performance of those markets has provided considerable momentum. But strategically diverse family office portfolios don’t solely rely on equities. 

“In a world defined by geopolitical and economic uncertainty, family offices have consistently adapted to new realities. There are signs of optimism. For a start, 2024 has shown positive signs of recovery. Inflation in the US is moderating, and GDP growth is aligning with long-term trends. Challenges, however, remain, particularly within venture capital, and certain commercial real estate sectors,” says Adam Ratner, Director of Research, Campden Wealth. 

Another important component of their investment strategies is that of private markets. Despite some underperformance in venture capital and real estate sectors, private markets remain significant in family office portfolios. This year’s survey showed an increased allocation to private credit and direct lending, reflecting a strategic shift towards more resilient, income-generating assets. 

Meanwhile, real estate, a traditionally stable asset class, has posed challenges due to oversupply and rising interest rates, particularly in the US commercial market.

For 41% of surveyed family offices, returns from private debt and direct lending were better than anticipated in 2024. On the other hand, 24% said returns from venture capital were lower than expected, and 17% experienced lower-than-expected returns from private equity funds.

Wealth transfers are moving forward

As seniors and baby boomers get older, the pace of intergenerational wealth transfer within family offices is set to accelerate. 60% of family offices anticipate that the transition of wealth from one generation to the next will happen within the next decade. That figure is driven by the surge in family office formation immediately after the turn of the millennium, which has now been almost a quarter century.

Approximately 80% of respondents reported that they view their family office as effective at orchestrating the intergenerational transfer of family wealth, at making informed decisions and communicating with family members. 

However, respondents generally do not view family offices as effective when it comes to fostering a collaborative approach between family members and avoiding conflicts between them. While many families may have originally formed family offices in part to minimise family controversy, the offices appear to be falling short of that goal. Family offices may need to think through their approach to initiating collaboration between family members.

Three-quarters of participants are satisfied with the investment function of their family office, both in terms of financial performance and the range of investment options that the family office offers. 

However, respondents are more ambivalent on whether family offices are providing value for money (67% satisfied). The areas in which family offices appear to be falling short of expectations are succession planning (42%) and the associated issue of providing financial education to the next generation (39%).

Retention of staff is an issue that continues to keep families awake at night. “A challenge for all family offices, both large and small, is the recruitment, engagement and retention of staff with appropriate professional and interpersonal skills,” says Samuelson. 

The limited pool of candidates with appropriate professional skills is cited by 37% of respondents as problematic while 27% highlight the limited number with appropriate interpersonal skills. 

The unstructured career progression of family offices is seen as the most serious constraint on recruiting and retaining staff (42%) followed by the inability to offer flexible working (38%).

Looking ahead to a stronger financial future

Throughout 2024, family offices report that their overarching economic concern has been the delay in the easing of interest rates by the US Federal Reserve. However, US inflation is no longer adrift from the Federal Reserve’s 2% target and easing appears to have begun. Fortunately, despite those concerns, most family offices are experiencing a positive financial performance after several years of upheaval.

Looking to the future, survey respondents say they also foresee risks to financial markets coming from political turbulence surrounding the US election and from geopolitical issues in the Middle East and Eastern Europe. On the bright side, few expect to see a global stock market sell-off.

Specifically, in the family office space, respondents expect several current trends to continue. Those trends include the fast pace of family office formation, emphasis on governance structures and an increasing percentage of investments into private markets.