World's wealthiest eye more private equity after bumper 2017
* Average 2017 return of 311 family offices was 15.5 pct
* Portfolios have 46 pct allocation to 'alternatives'
* Offices see direct private equity best for 2018
By Simon Jessop
LONDON, Sept 25 (Reuters) - The world's wealthiest families
plan to allocate more money to private equity after the asset
class helped drive an average 15.5 percent rise in the value of
their investments in 2017, according to a survey.
Some 311 family offices - set up to manage the wealth of one
or more rich families - took part in the survey, conducted by
Swiss bank UBS, whose wealth management arm manages
around $2.5 trillion in assets, and Campden Wealth.
The strong gains in 2017 followed an average return of 7
percent in 2016 and were driven by developed and developing
market listed equities, which returned 23 percent and 38
percent, respectively, and private equity, which returned 18
percent, the survey showed.
For 2018, the family offices expected their direct venture
capital and private equity investments to deliver the best
returns, of 13 percent, followed by private equity funds, at 11
percent, and direct real estate investments, at 8.4 percent.
"Family offices have delivered their strongest returns since
we began measuring their performance five years ago," Sara
Ferrari, head of UBS' Global Family Office Group, said.
"This reflects the bull market, as well as family offices'
ability to take a long-term approach and embrace illiquidity."
Private equity investments typically involve locking money
up in a venture for many years, as opposed to listed equity
markets which can be sold quickly.
The average portfolio, worth $808 million, was allocated 28
percent to listed equities, including 6 percent in developing
markets. Sixteen percent was in fixed income, with 46 percent in
so-called 'alternatives' like private equity and real estate.
A further 3.3 percent was in commodities, while 7 percent
was in cash, the survey showed.
Allocations to hedge funds, however, continued to be trimmed
and represent just 5.6 percent of the average portfolio after
several years of weak average performance and high fees relative
to those run by traditional asset managers.
The favourite style of hedge fund for those who did invest
was long-short equity, which can bet on both rising and falling
share prices, at 19 percent. Global Macro, which bets on
macroeconomic trends, was second most popular, at 13 percent.
($1 = 0.9588 Swiss francs)
(Reporting by Simon Jessop; Editing by Mark Potter)
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