In years, family offices have shown the highest level of optimism, according to a survey.

• According to Citi Private Bank's 2024 Global Family Office Survey, nearly all family offices, 97%, anticipate positive returns this year, and nearly half expect double-digit gains.
• A majority of family offices surveyed plan to increase their allocation to direct private equity in the next 12 months, with private equity being the largest investment category.
• Wealthy families' private investment arms, known as family offices, are increasingly making bold investments in market and valuation growth, as indicated by the latest survey.

The original article was published in CNBC's Inside Wealth newsletter with Robert Frank, providing a weekly guide for high-net-worth investors and consumers. To receive future editions, subscribe and have them delivered directly to your email inbox.

According to a new survey, family offices are the most optimistic they've been in years and are investing their money in stocks and alternatives as the Fed reduces interest rates.

According to Citi Private Bank's 2024 Global Family Office Survey, nearly all family offices, 97%, anticipate positive returns this year, and nearly half expect double-digit gains.

"According to Hannes Hofmann, head of the family office group at Citi Private Bank, who has been conducting the survey for five years, the most optimistic outlook has been observed, and there is a clear increase in risk appetite."

Family offices, the private investment arms of wealthy families, are emerging from two years of hoarding cash and bracing for recession to start making more aggressive bets on market and valuation growth, as indicated by the latest survey.

Family offices surveyed are mostly planning to increase their allocation to private equity, with 47% saying they will do so in the next 12 months, while only 11% plan to reduce their holdings. Private equity funds ranked second, with 41% planning to increase their allocation.

Family offices are increasing their allocation to developed-market equities, mainly the U.S., with interest rates declining. In contrast, only 9% of family offices plan to reduce their equity exposure, while 43% increased their exposure to public stocks last year.

According to the survey, major asset class holdings show that public equities remain their largest investment, with stocks accounting for 28% of their typical portfolio, an increase from 22% the previous year.

"According to Hofmann, family offices are withdrawing cash and investing in public equities, private equity, direct investments, and fixed income. However, the majority of their investments are in risk-on strategies, which is a significant shift."

Fixed-income investments are increasingly popular among family offices as interest rates decrease. In fact, half of surveyed family offices increased their fixed-income exposure last year, with the largest category, and a third plan to increase their holdings this year.

Family offices anticipate strong returns for 2024, with nearly half expecting more than 10% returns this year. Over 1 in 10 large family offices aim for returns of over 15% this year.

The survey by Citi revealed that while more than half of family offices cited the path of interest rates as their biggest worry about the economy and financial markets, relations between the U.S. and China ranked as their second-biggest concern, and market overvaluation ranked third. This marked the first time since 2021 that inflation wasn't the top worry for the family offices surveyed.

Family offices have a distinct characteristic that sets them apart from other individual investors: their hunger for alternatives. Private equity, venture capital, real estate, and hedge funds now make up 40% of the portfolios of surveyed family offices. This percentage is expected to increase, particularly as more family offices invest directly in private companies.

Family offices are asset allocators who are long-term investors, highly sophisticated, and take a long-term view, as shown by their significant allocation, according to Hofmann.

Family offices of Jeff Bezos and Bernard Arnault are among those that have invested in AI startups, and surveys indicate that AI is the top investment theme for family offices this year. Over half of family offices surveyed by Citi have exposure to AI in their portfolios through public equities, private equity funds, or direct private equity. Additionally, 26% of family offices are considering increasing their AI investments.

Hoffman stated that AI differs from past investment advancements, including crypto, ESG, and other investments. Only 17% of family offices have invested in digital assets, with the majority indicating disinterest.

"Hofmann stated that AI is a popular topic that people are investing in, while crypto received some interest but only play money was put into it. However, with ESG, there is a lot of interest expressed, but only a small percentage of family offices are actually putting significant money into it."