Single family offices are “crypto curious,” according to BNY Mellon Wealth Management, with nearly 39% of them already investing in cryptocurrency or exploring it. These findings, and more, were released in BNY’s inaugural family office report, titled “Enhancing Family Wealth”
For the report, BNY Mellon surveyed 189 single family offices with assets of at least $250 million between January 22 and February 19 this year. Approximately 69% of survey participants were located in the United States, 11% in the rest of the Americas, 15% in the Europe, Middle East and Africa region, and 5% in Asia-Pacific nations.
Funds with between $250 million and $499 million in assets under management made up 25% of survey respondents. Those with assets between $500 million and $999 million constituted 33%, and the cohort holding $1 billion to $4.9 billion comprised 32%. At the pinnacle, family offices with over $5 billion were 10%.
The survey also probed family offices’ insights on asset allocation and artificial intelligence, as well as top of mind risks and concerns.
Among family offices, the survey said, artificial intelligence is the most interesting investment opportunity over the next five years, followed by sustainable investments, renewable energy, health care and deglobalization. Across all geographies, nearly 80% of the offices named AI as one of the top investment themes for the near future.
According to BNY Mellon, nearly 60% of surveyed family offices are applying artificial intelligence and machine learning to aid their investment decision processes, using the technology to screen potential investments. What do they fear the most? Per the survey, the biggest hazards that family offices identified were geopolitical risk, cybersecurity threats and inflation.
Crypto Curiosity
Roughly one-third of family offices are actively investing in crypto and may increase their holdings, either through newly available cryptocurrency exchange-traded funds or by buying the crypto directly on an exchange.
What is their preferred venue for crypto? It’s a split: 55% of respondents favor ETFs specializing in crypto, while 54% say they are more inclined to buying crypto directly on exchanges.
Approximately 22% say they have had limited exposure to crypto, and 6% say they are exploring, but not actively investing in the asset class. Still, a large chunk of respondents has no exposure or interest in investing in crypto, 38% say they either have no exposure or interest in the asset class, and 2% say they have previously invested or are no longer interested in crypto.
Crypto exposure and interest are highest among smaller family offices, those with assets of less than $1 billion. Approximately 41% of family offices in this category plan to increase their exposure to cryptocurrency, while only 19% of family offices with over $1 billion assets plan to increase their exposure.
Among the reasons family offices explore crypto, 57% say they want to keep up with investment trends, while 51% say that crypto offers good investment opportunities. Interest from family office leadership was the reason for exploring crypto for 34% of funds, while 30% said concerns over rising inflation and interest from the next generation of family office successors respectively.
Some of the biggest challenges to crypto include the risk of hacking and cybercrime, which 77% say was an issue. The regulatory environment of these digital assets is also not very well defined, with 74% of respondents describing this as a moderate or very challenging factor.
A lack of government endorsement of the asset class is a major challenge among 70%. Sixty-seven percent point to crypto’s high volatility as a challenge, while 66% say the asset class is not a good store of value.
Asset Allocation
Private assets are continuing to grow in family office portfolios, although many offices plan to increase their allocation to public equities the most in the near future.
Their portfolios, as surveyed by BNY, are dominated by three asset classes: private equity, where the offices on average have an allocation of 27%, public equity with 21% and real estate, 13%.
Public fixed income, cash and real assets made up 9%, 8% and 4% of family office portfolios, respectively. According to BNY Mellon, cryptocurrencies account for around 5% of family office portfolios, just below hedge funds and private credit at 6% each.
More than half of respondents plan to increase their exposure to public equities, while only 14% intend to decrease their exposure. Real estate, private equity and private credit are the next three asset classes family offices intend to increase their exposure to, at over 40% for each category.
Of family offices planning to increase their private market investments, 37% will focus on growth equity strategies over the next 12 months, while 14% say they will prioritize buyouts. Private credit will receive priority from 19% of respondents, and private real estate, 11%. Approximately 20% do not aim to prioritize any of the above asset classes.
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Tags: BNY Mellon, BNY Mellon Wealth Management, Crypto, Family Office, Private Credit, Private Equity, Public Equity, Real Estate