Global Family Office Report 2021: Optimistic European family offices suffer low returns, poor succession planning and cyber attacks

By James Beech

European family offices are more optimistic about the economic outlook for 2022 than Asia-Pacific and North American peers and more than half of continental families are open to new investment opportunities.

The wealth of most European families increased over the past 12 months and their family offices expanded and matured in structures and services. However, investment returns for European families lagged behind their global counterparts. Just over half of European families have a succession plan in place and have a low opinion of how ready their next generation of family members are to succeed.

These original findings and more are revealed in the new flagship Global Family Office Report 2021: Regional Series Europe Edition by Campden Wealth with Deloitte Private, which launches today.

The vast majority of European families, at 89%, told Campden Research they expected the post-pandemic economic recovery to continue. More than half, at 56%, were looking for new investment opportunities and 43% were interested in diversifying their portfolios while 35% were realigning their portfolios to chase more growth opportunities.

The principal and family member of a single family office in the United Kingdom and Russia told Campden researchers he was feeling “very positive” about the quick recovery.

“The fiscal response has been much better co-ordinated than I think on any previous occasion in the last 20-30 years,” the principal said.

“Governments have shed their obsession with fiscal responsibility, rolled up their sleeves and done their job to support people through this. There is some lasting change in that the pandemic accelerated certain trends which were there before, but it doesn’t look like there was lasting damage, as the furlough scheme preserved the labour market fairly well.”

Most European families, at 73%, said their wealth had risen over the past year, with 20% describing the increase as “significant” and none reporting a notable decrease. Europeans saw a 58% increase in assets under management, 16% hailing their increase as “significant”.

Yet European families admitted their investments generated an average return of 12%, which underperformed compared to Asia-Pacific and North American families, at 15% each, and the global average of 13%.

The European appetite was growing for private and public equity deals—51% planned to allocate to direct private equity investments, 43% to private equity funds, 24% to developed market equities and 22% to developing market equities. The report said disaffection for fixed income was likely to continue, with 18% planning to reduce their exposure to major government bond markets.

“Healthcare, renewable energy, FinTech and biotech—those are our themes,” the chief executive and family members of a single family office in Monaco told Campden Research.

“We’ve targeted a couple of what I call thematic funds that are into at least three of those areas and we may add others, perhaps cyber security and 5G networking. Here, we would prefer to invest in a fund rather than individual investments.”

European family offices were more cautious than their worldwide counterparts when it came to cryptocurrency. The digital currency accounted on average for only 1% of European portfolios and while 17% planned to allocate more in 2022, Europeans trailed peers in North America (24%), Asia-Pacific (35%) and the global average (25%).

Inflation was pegged as the greatest market risk over the next 12 months for 70% of European families with rising interest rates a concern for 55%. Looking further ahead, investment risk was the biggest hazard for 79% of European family offices over the next 3-5 years yet unpreparedness for succession was considered less of a risk at 33%.

A growing threat was cybercrime. More European family offices, at 38%, than the global average of 30%, said they experienced cyber attacks over the past 12 months. However, only 19% described their cyber security plan as “robust” while 37% said their plan “could be better” and 34% had no plan at all.

Despite the world being in the midst of a major generational transfer of wealth, barely one-third, at 32%, of European next-gens have already assumed control of the family wealth. Another 34% will do so within the next decade. About half, at 52%, of European respondents had a succession plan in place, below the global average of 55%. European family principals said only 12% of their next generation cohort were “very prepared” for succession, the same as the global average, but most were “somewhat prepared” at 47%, above the global average of 39%.

The principal of a British single family office told Campden Research the second generation knew and were committed to their roles, “so we don’t have to worry what happens when the first generation is no longer there.

“Both generations are currently heavily involved in giving the family office directions. If there are investments to be made or money to give out, they are heavily involved. I expect that will not change once the next generation takes over.”

Campden Wealth launches today the seventh edition of its flagship Global Family Office Report for 2021, the seventh agenda-setting and benchmarking report since its debut in 2014. However, for the first time, Campden Wealth has introduced three regional reports covering Asia, with Raffles Family Office; Europe, with Deloitte Private, and North America with the Royal Bank of Canada, to provide richer and more granular analysis.

The reports were based on statistical analysis of a record number of 385 surveys with family offices worldwide, with 20% from Asia-Pacific, 28% in Europe and 46% from North America.

Click below to find out more about the reports and stay with CampdenFB as we explore the findings.

Top Stories