Increased regulation, especially around riskier and more specialist asset classes, is driving risk appetite among family offices, a new study finds.

According to a global survey organized by fund services provider Ocorian, three-quarters ( 73% ) of family offices cite improved regulation for the increased risk appetite in their respective organizations, while 60% point to increased transparency.

Just half ( 53% ) say they believe markets are ready to recover, and 39% say family offices have been holding cash too long.

Respondents agree on the need for regulatory support – just one in six ( 16% ) believe they are in a strong position to meet regulatory demands amid rising complexity in the investment field, while 56% say they are in quite a strong position. More than a quarter ( 27% ) believe their ability to meet regulatory requirements is average.

Greater professionalization

In Singapore, tax incentive schemes for single-family offices under Sections 13O and 13U of the Income Tax Act require the employment of at least two or three investment professionals to qualify. These conditions encourage family offices to expand their teams, deepen investment expertise, and strengthen operational infrastructure in line with their increasingly sophisticated strategies.

“These policies not only encourage greater professionalization but also ensure that family offices have the in-house expertise to manage increasingly sophisticated investments,” says Andrew Ho, regional head, private clients, Asia-Pacific, at Ocorian.

“Improvements in regulation around riskier assets are a key factor in this transformation, but at the same time, family offices appreciate they need more regulatory support if they are to make the most of the potential opportunities.”

More than three in four ( 76% ) respondents say increasing sophistication in family offices is leading more staff to carry out more advanced deals and strengthen their operational infrastructure.

About 66% believe risk appetite will increase in the next 12 months in their respective organizations. Just 7% say their organization’s risk appetite will decrease, while 27% say it will stay the same during the period.

“Family offices have significantly strengthened their operations recently, recruiting more staff and improving infrastructure as they become more sophisticated organizations carrying out more complex trades,” says Ho.

Popular asset classes

European equities, emerging market equities, and private equity are the most popular asset classes that family office fund managers expect to increase allocations to in the next 12 months.

There is also a growing appetite for alternative assets, and all the respondents agreed that this will be a long-term trend. When it comes to where the alternative assets or family offices that hold them are based, 65% of respondents say the United Kingdom is leading the way, while more than half ( 54% ) point to the Middle East. About 48% highlight the European Union, 31% pick Africa, and 24% choose the Americas.

The study was based on a survey commissioned by Ocorian in June and conducted by independent research company PureProfile. It covered about 200 people in the family office sector, including family members, full-time employees of family offices, and specialist intermediaries such as lawyers, wealth managers, private bankers, and tax advisers working for family offices.

The respondents were based in the UK, the United Arab Emirates, Singapore, Switzerland, Hong Kong, South Africa, Saudi Arabia, Mauritius, Bahrain, Bermuda, Cayman, British Virgin Islands, and Jersey. The total value of wealth managed or owned by the families was US$68.26 billion.