Navigating the interest rate cycle is a paramount challenge for family offices in Germany, according to a recent survey. These offices, tasked with managing the wealth of affluent families, also see their investment strategies challenged by geopolitical upheaval and an economic slowdown.
The survey reveals a shift towards realigning asset allocations in response to peaked interest rates, with increased interest in private equity, especially in healthcare. Environmental, Social, and Governance (ESG) criteria are gaining prominence in investment decisions.
The study by the Munich-based consultancy Roland Berger, conducted in partnership with the German Institute for Family Business and Mittelstand at WHU university, indicates a departure from previous stable asset allocations, driven by recent low interest rate environments. The rise in interest rates, with associated higher project and financing costs, has become a key challenge for 86% of family offices, up from 82% in 2022.
Interestingly, the energy and commodities crisis is no longer a primary concern, with only 47% of family offices viewing it as a challenge, down from 89% in 2022. This change is attributed to a process of familiarisation and adaptation.
Geopolitical issues, while still a top concern, have decreased in importance compared to economic developments. The focus is now on identifying attractive investment targets that can withstand a recession.
Digitalisation and climate change are increasingly prioritised, but the current emphasis remains on optimising asset allocation. Real estate is seen as a particularly attractive opportunity amidst high interest rates, with equities and private equity also gaining traction.
Private equity has entrepreneurial appeal
The study highlights a growing interest in private equity investments, especially in the healthcare sector, influenced by an ageing society and the Covid-19 pandemic. Digital businesses are also attractive due to their increasing acceptance among end customers. However, green technologies have seen a decline in interest.
Direct investments in companies, especially in private equity, appeal to family offices due to their entrepreneurial dimension and the ability to actively influence the target business. The main focus is on companies with annual turnovers of less than 20 million euros, with a significant portion investing in the 21-50 million euro range. Only a minority target companies exceeding 100 million euros in turnover.
Central challenges for family offices:
