Family offices are making major shifts in their portfolios, increasing their exposure to bonds and emerging-market equities, according to a UBS survey. The wealthy cohort plans to raise developed market fixed income investments in 2023, with more than one third of family offices aiming at high-quality, short-duration bonds, according to the survey, which earlier this year polled 230 global family offices. The average net worth of participating families was $2.2 billion and the average family office managed $900 million. “The shift that’s going on is very telling,” Charles Otton, head of UBS’s global family and institutional wealth business, told CNBC. “Developed market fixed income and government bonds are strongly attractive to family offices as they look to 2023 in a very different rate environment.” The Federal Reserve has raised interest rates 10 times since March 2022, taking the fed funds rate to a target range of 5%-5.25%, the highest since August 2007. Government bonds became an attractive asset for investors seeking steady income in a volatile market, and to hedge the risk from stocks. “The fact that they can get a 5% yield on government bonds is governing a lot of people’s behavior. They want to defensively protect themselves with stable fixed income,” Otton added. More than a third of respondents also plan to lift their emerging market equity allocations, a play on the peak in the dollar as well as China’s economic reopening, UBS says. U.S. firms surveyed by UBS said their top-of-mind concern is the likelihood of a recession. The economy has been in a precarious position amid the Fed’s aggressive rate hikes, with little room for error. Duquesne Family Office’s Stanley Druckenmiller, for one, has been calling for a recession for a while . He believes that the extraordinary quantitative easing and zero interest rates over the past decade created an asset bubble, and markets are now in the final stage of it bursting.