In the portfolios of family offices less cash and more appetite

Portfolios that are more exposed to risk and copious liquidity that, having stopped in 2023, is now working on fixed income, equities and private markets. This is the picture that emerges when it comes to the investment choices of the world's largest family offices (338), as Citi's latest analysis of the sector reveals. In 2024, 49% of respondents increased their allocation to bonds, attracted by yields close to record highs; 43% increased their weighting in recovering equity markets (high exposure to tech), up from 20% in 2023. Interest in private equity is also growing, rising from 38% to 42%.

The portion allocated to cash is shrinking: around 37% reduced their exposure to cash in 2024. Real estate is stable: 55% maintain their 2023 positions. For the year ahead, sentiment is more positive than in 2023, with greater confidence in direct private equity, private equity through funds and global developed country equities. As for geographic allocation, North America (60%), Europe (16%) and Asia-Pacific excluding China (12%), where positions have halved since 2023, due to the country's ongoing economic challenges and market difficulties.

Optimism prevails with 97% of respondents expecting positive returns (almost half expecting returns above 10%). Larger family offices (over $500 million in assets) have a more positive outlook than smaller ones, which estimate returns of 20% and more or between 10% and 20%. Interest rate trends are the main concern, followed by geopolitical issues such as US-China relations and the Middle East conflict. Investment approaches are becoming more sophisticated and the use of artificial intelligence is increasing to ensure strong returns. Two priorities for families: preserving wealth and preparing young people for future responsibilities

On the family office front, compared to the global scenario, Italy has yet to make progress. "In Europe, it is the families of the Nordic countries (Germany, Holland, Sweden) that started first and where the Anglo-Saxon influence has been greatest," recalls Francesco Lombardo, head of private banking Italy at Citi. - These family offices follow very traditional guidelines: alternatives, hedge funds, bonds, recourse to international managers'. As Lombardo recalls, Italy lagged behind for years because families with large assets to preserve them had an invincible tool, the government bond that yielded 11 to 12%, and so there were no other requirements. In the 2000s it was DIY time, but then many entrepreneurs began to realise that risk is only taken with enterprise and that finance should be managed by reliable and capable professionals. Since 2010 there has been a move towards structuring with family offices. 'So, in Italy the phenomenon is relatively recent, not everyone is so organised, but the gap is closing, with some FOs further ahead than others,' Lombardo adds. Asset allocation varies a lot: alternatives are very present with a strong tendency to invest in private equity and hedge funds that are coming back into fashion'.

Italy stands as a tax magnet for the British rich after the end of the no-dom regime. "The Italian tax regime is ingenious and super favourable, but so far it has not been as successful as hoped for the country," concludes Lombardo. "There are an estimated 100,000 new residents from all over the world and many more on the way. Low numbers compared to the potential . The reason? The process is complicated and, for example, the British still do not trust Italy. The idea is so valid that we have dedicated the Gran Tour project to it and it is bringing great satisfaction'.