Family offices fear dollar depreciation, lower investment returns in wake of tariffs

Family offices are exhibiting increased caution and lower return expectations, with a recent survey by RBC Wealth Management and Campden Wealth indicating a majority (52%) now favor cash and liquid assets for the best 12-month returns, a significant shift from prior years. Triggered by tariff announcements and geopolitical tensions, 2025 return expectations have fallen to an average of 5% from 11% for 2024, with liquidity improvement becoming the top priority. While concerns about U.S. dollar depreciation and underperforming private equity and venture capital exits are prevalent, family offices are also strategically accumulating cash for future opportunistic investments, with a net 20% still planning to increase direct private equity allocations, reflecting a long-term view for wealth generation despite short-term market uncertainties.

Analysis

Family offices (FOs) are exhibiting a significant shift towards caution, driven by tariff announcements and geopolitical tensions, according to a recent RBC Wealth Management/Campden Wealth survey. A majority (52%) now favor cash and liquid assets for the best 12-month returns, a stark contrast to last year's preference for growth equities and defense. This increased conservatism is reflected in lowered 2025 average portfolio return expectations, falling to 5% from 11% in 2024, with 15% anticipating negative returns.

Improving liquidity has become the top investment priority for nearly half of FOs, replacing portfolio diversification. Key concerns include U.S. dollar depreciation, cited by 52% of respondents, following a nearly 9% year-to-date drop. Furthermore, private equity and venture capital performance is under scrutiny, with nearly a quarter of FOs reporting unsatisfactory returns from PE funds and 33% from venture capital.

Despite the prevailing caution and recent underperformance in private markets, family offices are strategically accumulating cash not just for risk mitigation but also for opportunistic future investments. While only a net 3% intend to increase cash allocations, a notable 20% plan to increase direct private equity investments and 13% for private equity funds. This indicates a long-term perspective, where private markets are seen as essential for wealth generation over extended horizons, despite short-term challenges.

Key Decisions for Investors

• Monitor shifts in institutional investor sentiment, particularly among family offices, as their increased caution and preference for liquidity may signal broader market uncertainties.
• Evaluate portfolio allocations for sufficient liquidity, considering the potential for opportunistic entries during periods of market volatility, aligning with family offices' strategic cash accumulation.
• Re-assess exposure to private equity and venture capital, acknowledging reported underperformance and slower exits, while also considering the long-term strategic role these assets play in wealth generation for patient capital.
• Keep a close watch on currency movements, specifically the U.S. dollar's depreciation trend, as it is a significant risk factor for a majority of ultra-high-net-worth investors.