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Gulf family offices put US exposure under a microscope
Family offices across the Gulf have told AGBI they are reassessing their exposure to US assets due to war-driven volatility, with a growing focus on portfolio rebalancing.
The shift does not signal an abrupt retreat from US assets. Rather, it reflects a more deliberate recalibration of concentration risk and liquidity positioning among family offices which hold some of the region’s largest pools of private capital.
“I am not seeing evidence of a broad move to cut US exposure outright,” said Abhishek Datta, vice president at financial services firm Continental Group. “But the old assumption that every crisis automatically produces a strong, sustained move into all US assets no longer holds.”
US equities are experiencing a pronounced downward trend, with major indices like the Dow, S&P 500 and Nasdaq falling due to rising oil prices and escalating Middle East geopolitical tensions.
“I would not say the haven bid has disappeared. It is weaker and carries a clearer political risk premium than before,” Datta said.
Aside from the Iran conflict, US equities are trading at elevated levels. The S&P 500 is on a forward multiple of around 20 times earnings above both five and ten-year averages, while market performance remains concentrated in a small number of very large companies.
Against that backdrop, the reassessment is less about whether the US still matters and more about whether valuations justify the risk.
“The most realistic risk is delayed commitments and a higher bar for new money going into the US. When markets are already expensive, even a moderate slowdown in marginal demand can matter,” Datta said.
Deep pockets
Despite this, Gulf-based investors remain heavily allocated to US markets, spanning real estate, private equity and public markets. Family offices continue to cite deep pockets, liquidity and breadth of opportunity that is difficult to replicate elsewhere.
What is changing, however, is the “automatic nature” of those allocation decisions and their exposure to the US, according to the chairman of the Family Office Summit, Obediah Ayton.
He says the unpredictability of outcomes from the conflict is making “certain families exposed to certain industries” think again about where their assets are allocated.
Yet exiting the US is neither practical nor timely for some family offices. VAR Capital, which oversees assets for more than 40 family businesses across jurisdictions including the Middle East, maintains roughly 70 percent of its portfolio in the US, much of it in illiquid holdings or assets that have gone down in value due to the war.
“Overall, I would say there is a pause but not divestment,” said Vikash Gupta, CEO of VAR Capital.
Gupta argued that while questions around the dollar’s long-term haven status are growing, near-term alternatives remain limited. The US economy’s scale as the world’s largest consumer market continues to reinforce its investment case.
“We have to separate the geopolitics from the investment opportunities,” said Gupta. “Wars are short lived, but smart investing creates a long term return.”
Sector preferences are also shifting. For VAR Capital, military-related industries are the new AI.
“We are also looking at defensive sectors such as industrials and healthcare,” Gupta said.
Data from Campden Wealth and HSBC indicate that Mena family offices are entering a phase of relatively high liquidity and real-asset exposure: 18 percent in cash, 11 percent in bonds and 34 percent in real estate, compared with 17 percent in private equity and just 3 percent in private debt or direct lending.
“The shift is not away from growth altogether. It is toward better liquidity, clearer cash flow and more control over exit risk,” said Datta.
Uncertain outlook for Europe
Meanwhile, wealth manager Julius Baer’s co-head global asset class specialist Rishabh Saksena said the widening credit spreads could create more attractive entry points for long-term investors into Europe.
However, higher energy prices triggered by the war are reviving concerns about Europe’s outlook, tempering what had been a more constructive view on the region, as discussed in Bloomberg’s Odd Lots podcast.
“There had been some optimism recently because of cheaper energy prices that increased the relative competitiveness and profitability of the domestic industrial giants,” said Joe Weisenthal, the show’s co-host.
“But the war and the structurally higher energy prices continue to build on the negative side of Europe.”
The conflict is prompting a broader reassessment of global allocation strategies.
“There is a need for portfolio diversification [beyond the US], where countries such as China and Japan could benefit from an equity flows perspective,” Saksena said.
“[Gulf family offices] are now asking a question they rarely asked before: ‘Why the US first?’,” Ayton said. “And [they are] finding credible answers elsewhere – India, Southeast Asia, Europe and the GCC itself are all receiving capital that would previously have gone West without a second thought.”
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