As of 2024, there were a record 813 billionaires worth a combined $5.7 trillion in the US, according to Forbes(1), up from the 756 billionaires quoted by World Population Review(2) in 2023. As of the end of 2023, California has 186 billionaires – the most billionaires of any state, according to Statista(3).
What are these ultra-wealthy investors prioritizing and investing in? UBS, a leading global wealth management firm, recently published its annual Global Family Office Report(4), bringing together insights of 320 single family offices of billionaires around the world. It also just released its Global Wealth Report(5), which looks at wealth growth, distribution, transfer, inequities, and outlook for the near to mid-term future.
While many residents of the Palm Desert area are not going to be underwriting family offices – which are used to centralize and coordinate aspects of a family’s financial affairs with a dedicated team of professionals for individuals or families, generally, with $50M or more – there are more than 1.14 million California households that do have more than one million in investable assets, representing nearly 9% of California’s 13.5 million households(6). And, they are heavily concentrated in the Inland Empire, Orange County, San Diego, Los Angeles, and the Bay area.
They, and others that may aspire to be in that category, might be interested in what wealthy investors are prioritizing when it comes to finances, and what are their main concerns? Following are some key findings from the two reports:
- How are family office holders allocating wealth? In a move to rebalance portfolios and lower risk, many family offices in 2023 shifted larger allocations to developed market, fixed income vehicles. Some of this may reflect elevated bond yields; however, it was the largest amount seen allocated to fixed income in five years. For 2024, family offices expect to sustain these changes but not shift much higher, as inflation and policy rates appear to have peaked in the US and EU and are expected to gradually move lower in a healthier global economy. Given seemingly lower interest rate sensitivity in the United States, almost three-quarters (i.e. 73%) of family offices believe real interest rates will remain positive in the US for longer than in Europe.(7)
- Their thoughts on real estate and private equity? Allocations to real estate also declined in 2023 when commercial real estate prices in some regions had corrected and traffic and occupancy rates were still lower post-Covid, but there is lower rate sensitivity in the US than in Europe. Average allocations to real estate declined to 10% in 2023, down from 13% in 2022. For 2024, family offices plan to partially reverse the decline in real estate allocation, with the average recovering to 12%. In private equity, overall allocations remain relatively steady but see a slight increase to raise allocations in funds or funds of funds to 13%, most likely in search of greater diversification. More than one-third of family offices (39%) plan to add to direct private equity investments and a similar proportion (34%) will add to funds/funds of funds. Suggesting they are becoming more optimistic, more than a quarter (28%) plan to cut cash allocations.(8)
- What are their biggest anxieties? Family offices are most concerned about the danger of a major geopolitical conflict, in both near and medium terms. Over a five-year horizon, they also view climate change as a top risk, alongside high levels of debt. For family offices, sustainability is becoming an essential matter of risk and opportunity for both operating businesses and investment portfolios. As sustainability requirements become more specific, partly driven by regulations, family offices want more sophisticated information and advice on sustainable companies.(9)
- What about inflation? In 2023, inflation fell back from the peak it had reached in 2022 and real growth exceeded nominal growth slightly. This doesn’t mean that inflation disappeared, far from it – but the reduction from the year before was enough to push up real growth relative to 2022. In the US, average wealth per adult grew by almost 2.5%(10). Inflation and interest rates are still a concern for the next twelve months but appear to play a less prominent role over the longer term.
- Where are family offices investing? Family offices appear to be strong believers in American exceptionalism, as US tech companies lead the generative artificial intelligence (AI) revolution and occupy a growing share of global equity markets. On average, family offices have 50% of their portfolios invested in North American asset classes, continuing to build on a multiyear theme of increasing investments in a region resilient to high policy rates and geopolitical risks, while offering the prospect of relieving global labor shortages through AI’s anticipated productivity gains.(11)
Just over a quarter (27%) of total allocations are in Western Europe with its market-leading companies in luxury goods and automation. In Asia-Pacific markets including Japan, India and Australia (but not China), assets accounted for 9% of portfolio allocations. Greater China, by itself, accounted for 8%, although that shows regional bias by North Asian and Southeast Asian family offices; European and North American family offices have allocated just 2% to Chinese assets. Most intend to increase investments in the North American, Asia-Pacific (excluding Greater China) and Western European regions within the next five years.(12)
- What is happening with wealth mobility? A substantial share of people in the UBS Global Wealth Report do move between wealth brackets in their lifetimes and it is more likely for people to move up the ladder than down it. The likelihood of getting richer tends to decrease over time, however. UBS analysis shows that the longer it takes adults to gain appreciably in wealth, the slower the increase tends to be in future years. However, in many couples, one partner is younger than the other. Generally speaking, women live longer than men, by as much as 4-5 years. This indicates that intra-generational wealth occurs before intergenerational wealth transfer.
- What does the future look like? Analysis also shows that USD 83.5 trillion of wealth will be transferred within the next 20–25 years. UBS estimates USD 9 trillion of this will be shifted horizontally between spouses, the majority in the Americas. Over 10% of the total USD 83.5 trillion is likely to be transferred to the next generation by women.(12)
Could you make millions with a great idea or with your talents or come into a windfall inheritance? With wealth acceleration and expected transfers, and regardless of your financial status, it behooves each individual to become better educated on finances and investments.
Pat Lizza is Branch Manager with UBS Financial Services Inc., a subsidiary of UBS Group AG, Member FINRA/SIPC in the Indian Wells, California office and a member of the Aligned Wealth Partners team at UBS. Aligned Wealth Partners has built a comprehensive wealth management business serving select professionals, entrepreneurs, retirees and their families. With financial planning at its core, the team recognizes that every client has a unique set of circumstances and aspirations. Pat and his wife, Tricia, live in La Quinta and have two grown children. He can be reached at [email protected]
Sources:
- Forbes, April 4, 2024: Top 200 Billionaires Report 2. “Most Billionaires by State 2024,” worldpopulationreview.com. 2024-07-10. 3. Statista: American states with highest ratio of millionaire households per capita in 2020. https://www.statista.com/statistics/294941/largest-ratio-millionaire-households-per-capita-us/ and World Population Review 2024: Most Billionaires by State 4. UBS Global Family Office Report ©2024 5. UBS Global Wealth Report ©2024 6. TNS Global, market information company, as quoted by Real Estate Advisor: Top 10 US Counties with the Most Millionaires ©2023 7. UBS Global Family Office Report 2024: Executive Summary ©2024 8. UBS Global Family Office Report 2024: Section 3 Private Equity and Real Estate ©2024 9. UBS Global Family Office Report 2024: Section 4 Sustainability and Impact ©2024
- UBS Global Wealth Report 2024: Chapter 1 Global Wealth Levels ©2024 11. UBS Global Family Office Report 2024: Section 1 Asset Allocation and Diversification ©2024 12. UBS Global Wealth Report 2024: Chapter 4 Wealth Mobility ©2024
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