As we progress through 2025, the global economic landscape is increasingly characterized by volatility and uncertainty, primarily due to escalating trade tensions. The UBS Global Family Office Report 2025 highlights that 70% of family offices identify a global trade war as the most significant threat to their financial objectives over the next 12 months. This concern is further amplified by the unpredictable nature of U.S. trade policies, which have introduced sweeping tariffs, particularly against China and the European Union.
Trade Wars and the Investment Climate: New Risks, Enduring Objectives
Trade wars disrupt global supply chains, increase operating and input costs, and inject volatility into both equity and debt markets. For family offices—whose portfolios often span multiple geographies and asset classes—these disruptions can meaningfully erode investment returns. The unpredictability of trade policy, especially amid escalating tensions between the U.S., China, and the EU in 2025, complicates long-term decision-making. A single tariff hike or export restriction can shift asset valuations and undermine previously sound strategies, making agility and diversification more critical than ever.
Despite these headwinds, family offices continue to hold fast to their long-term objectives. According to the UBS Global Family Office Report 2025, developed market equities remain a cornerstone of strategic allocation. The average allocation to these equities rose from 24% in 2023 to 26% in 2024, and is expected to reach 29% in 2025. This trend reflects a calculated pursuit of structural growth opportunities, particularly in sectors like generative AI, healthcare, and electrification that are both future-oriented and less directly exposed to the ripple effects of geopolitical friction.
However, capital is not being allocated indiscriminately. The modest decline in private equity allocations, down from 22% to 21% year-over-year, reveals growing caution among family offices in light of subdued capital markets, high financing costs, and limited exit opportunities issues often exacerbated by the broader economic instability trade wars can produce. Similarly, risk appetite for emerging markets remains tempered as concerns about political unpredictability and supply chain vulnerabilities persist.
One noteworthy shift is the rise of private debt. Once considered a niche alternative, it has now moved into the spotlight with allocations doubling from 2% in 2023 to 4% in 2024. The appeal is clear: private debt offers attractive yields, structural protection, and diversification, especially amid uncertain interest rate trajectories. It allows family offices to hedge against inflation and market volatility while staying insulated from public market shocks triggered by geopolitical developments.
Strategic Responses to Trade War Risks
In response to these challenges, family offices are adopting several strategic measures:
- Diversification Across Asset Classes and Geographies
Family offices are increasing allocations to developed market equities, particularly in sectors like healthcare and technology, which are perceived as more resilient to trade disruptions. The UBS report notes an increase in average allocation to developed market equities from 24% in 2023 to 26% in 2024, with plans to raise this further to 29% in 2025. - Emphasis on Private Debt and Alternative Investments
There is a notable shift towards private debt, with allocations doubling from 2% in 2023 to 4% in 2024. This trend is expected to continue, as private debt offers diversification and potential for higher yields in a low-interest-rate environment. - Active Management and Hedging Strategies
Given the market volatility, family offices are increasingly relying on active management to navigate the complexities of the current economic environment. Hedging strategies, including the use of derivatives and investments in precious metals, are also being employed to mitigate risks associated with currency fluctuations and market downturns. - Focus on Liquidity and Operational Efficiency
Maintaining liquidity is crucial in times of uncertainty. Family offices are adjusting their portfolios to ensure sufficient liquidity to capitalize on investment opportunities and meet obligations. Additionally, there is a trend towards professionalizing operations, with an emphasis on financial performance measurement and risk management.
Long-Term Considerations
While the immediate focus is on mitigating the impacts of the trade war, family offices are also considering long-term strategies to preserve wealth across generations. This includes developing comprehensive succession plans, with an emphasis on tax-efficient wealth transfer and involving the next generation in the planning process. However, the UBS report indicates that only 53% of families have a wealth succession plan in place, highlighting the need for greater attention in this area.
The current global trade tensions present significant challenges for family offices. However, by adopting diversified investment strategies, focusing on liquidity, and professionalizing operations, family offices can navigate these turbulent times.
