3 Key Takeaways:
- Family offices have 46% of their portfolio in alternatives.
- U.S. family offices hold 49% in alternatives, focusing on private equity and real estate.
- Cybersecurity remains a major concern, with 40% identifying it as a key vulnerability.
What Happened?
Large family offices are shifting away from the stock market, with nearly 46% of their total portfolio now invested in alternative assets like private equity, real estate, venture capital, hedge funds, and private credit. The J.P. Morgan Private Bank Global Family Office Report reveals this trend among 190 surveyed family offices, which manage an average of $1.4 billion in assets.
U.S. family offices, particularly those with over $500 million in assets, show an even stronger preference, investing 49% in alternatives and only 22% in public stocks.
Why It Matters?
This movement signifies a critical shift in investment strategies. Family offices are seeking higher returns and lower volatility through alternatives, which experience more gradual valuation changes compared to the stock market’s wild swings.
William Sinclair of J.P. Morgan Private Bank highlights that family offices, with their long-term investment horizons, can capitalize on the “liquidity premium” of these assets. By investing in private companies, they not only aim for stable growth but also leverage their entrepreneurial experience to drive company success.
What’s Next?
Expect the trend toward alternative investments to continue, particularly in private credit and digital infrastructure. Family offices are also likely to increase their reliance on external advisors for investment management and cybersecurity, as 40% have identified cybersecurity as a significant vulnerability.
As family offices grow more influential in private markets, their investment decisions will shape the future landscape of private equity, venture capital, and infrastructure development.
Family offices are now powerful players in private markets, deploying over $6 trillion in assets. Their strategic shift could lead to more stable returns and reduced market volatility, benefiting long-term investors. With the increasing complexity of managing these diversified portfolios, the role of external advisors and robust cybersecurity measures will become even more critical.
