World’s Richest Families Reduce Dollar Exposure Amid U.S. Debt Concerns (Worthy News Focus)

by Stefan J. Bos, Worthy News Europe Bureau Chief

LONDON/ZURICH (Worthy News) – The world’s wealthiest families are reducing their exposure to the U.S. dollar amid growing concerns about the long-term outlook for the world’s dominant reserve currency due to rising American debt levels and geopolitical tensions, according to reports released Thursday by UBS and JPMorgan Asset Management.

The findings suggest a broader reassessment of investment strategies among global family offices managing billions of dollars in assets.

About two-thirds of family offices surveyed by Swiss banking giant UBS said they expect confidence in the U.S. dollar as a reserve currency to weaken over the next five years.

UBS said the survey was conducted between January and late March, before the dollar began outperforming several major currencies in recent weeks.

The bank surveyed 307 clients worldwide whose families had an average net worth of about $2.7 billion.

FAMILY OFFICES SHIFT STRATEGY

UBS strategist Maximilian Kunkel said the dollar’s depreciation in the year before the survey prompted many wealthy families to reassess their portfolios.

Nearly half concluded they were overexposed to U.S. dollar-denominated assets across multiple asset classes, according to UBS.

The report said family offices increasingly plan to diversify away from U.S.-centric portfolios by adding investments in emerging-market equities and infrastructure, while reducing exposure to real estate.

“For the first time, we are feeling that family offices want to build up in Asia Pacific and, to a certain degree, also in Western Europe,” said Benjamin Cavalli, a UBS executive.

He added that the trend mainly affects family offices outside the United States, though UBS is also seeing limited signs of “de-dollarization” among some American investors.

GEOPOLITICAL RISKS DOMINATE

UBS said geopolitical conflict has now become the leading concern among wealthy families by a wide margin.

The bank noted that many family offices are responding by combining investment diversification with “multishoring” strategies, meaning they are spreading activities and assets across several jurisdictions.

Separately, on Thursday, Patrick Thomson, the Europe, Middle East, and Africa chief executive of JPMorgan Asset Management, the investment management arm of banking giant JPMorgan Chase, warned that the dollar could weaken over the long term due to America’s growing debt burden.

Speaking at an International Capital Markets Association conference in London, Thomson said investors remain concerned about the United States’ fiscal position.

“The hegemony of the U.S. Treasury is still alive and well,” Thomson said. “But as fixed income investors, we look at the fiscal balance, trade, and the ability to pay back that debt.”

EUROPE SEEN AS OPPORTUNITY

“There is an argument to say over the long term the U.S. dollar will weaken,” Thomson added. “The dynamic of the fiscal position in the U.S. is creating a level of debt that is not sustainable in the long run.”

The dollar has nevertheless gained nearly 2 percent against a basket of major currencies since the outbreak of the Iran war earlier this year, helped partly by the United States’ position as a net energy exporter.

However, analysts said the recent gains followed a sharp decline last year when uncertainty surrounding U.S. trade policies and tariffs prompted investors to seek alternatives.

The euro and the Chinese yuan have emerged among the currencies benefiting from that diversification trend, analysts said.

Thomson said Europe now has “a great opportunity” to position itself as a safer haven for global investors if policymakers implement reforms to strengthen the region’s capital markets.

EUROPE URGED TO REFORM

“Our business is growing substantially in Europe. We run over a trillion dollars of assets,” Thomson said, citing stronger German fiscal spending, efforts to mobilize household savings, and investor diversification away from the United States.

“We’re seeing much more appeal to move capital back into Europe as a diversifier, because there are very attractive companies and investment opportunities,” he added.

Valerie Urbain, chief executive officer of Euroclear, also urged European leaders to deepen financial markets if Europe hopes to compete more effectively with the United States.

“For that, we need to have more investors and more issuers,” Urbain said. Analysts say the growing debate over U.S. debt sustainability and diversification away from the dollar reflects broader questions about American economic strength and the future structure of the global financial system.

The United States’ national debt has risen above $36 trillion, raising concerns among some investors and economists about Washington’s long-term fiscal position and the future strength of the dollar.

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