Family offices are significantly more skeptical about sustainable investing than pensions, endowments and other institutions, according to the second annual Institutional Investor Global Asset Management Survey.
Only 30 percent of family offices surveyed considered any ESG factors in the investment process, compared with 60 percent of total respondents. And just 26 percent of families integrate climate-risk analysis.
Family office respondents were polled on net zero commitments, the energy transition, and the environmental and social impact of investments. About half said these issues are not relevant to their investment decision-making at all. Other allocators, in comparison, were about twice as likely to incorporate these themes into portfolios and investment strategies.
The fact that asset managers and institutional investors are more likely to consider these issues is indicative of the how sustainability has evolved within the wider industry over recent years. Reputational management, regulatory compliance, and investor demand make evaluating environmental issues necessary for some asset managers and big investors, especially in Europe.
Family offices, on the other hand, by nature are not subject to those pressures and can take a less cautious approach to portfolio selection.
In terms of allocation, family offices continue to hold large positions in equity, with about 33 percent of portfolios in public equity and 20 percent in private equity. The data indicates that investors intend to explore digital assets and hedge funds in the coming year, in addition to increasing equity allocation.
Last fall, II surveyed 375 investors, including family offices, and asset managers globally about portfolio allocation, investment decision-making, and strategic risks by geography and distribution channel. The results highlight key gaps between family offices and the wider industry, as well as a notable shift in family office concerns since II’s inaugural survey in 2024.
The results reveal that geopolitical risk has overtaken technology as the dominant concern for family offices. A whopping 81 percent listed geopolitical instability as their top concern, with macroeconomic risk, the potential for a debt crisis, and a global recession following close behind. According to the survey, the reasons are fallout from tariffs, wars, uncertain supply chains, and domestic political turmoil in the largest economies in the world.
And with geopolitical tensions across the world reaching new heights, family offices are far more negative about the global economy and markets than other institutional investors. Thirty percent of respondents reported being pessimistic or very pessimistic, compared with just 15 percent of all investors.
Much of this uncertainty directly or indirectly involves the United States and is impacting valuations. Sentiment about U.S. markets is evolving, with almost 40 percent of family offices planning to reduce exposure in the coming year to limit concentration risks.
Geopolitics is not the only risk. Respondents identified technology and artificial intelligence as other important forces shaping investor sentiment. More than half of respondents said using technology, AI, and data to enhance reporting and transparency is a priority, as is integrating new technology and data science into the investment process itself.
Institutional Investor also analyzed the data for pensions and endowments.
