BlackRock has published its Global Family Office Report, entitled Seizing opportunities in times of change. The bi-annual study surveyed 120 single family offices with a total AUM of USD243 billion.
Compared to the study two years prior, nearly twice as many respondents (46 per cent) intend to make changes to their investment strategy or portfolio than in 2020 (23 per cent), citing heightened volatility, rising inflation and interest rates, and geopolitical tension. Some family offices are rebalancing their portfolios away from illiquid assets to capture opportunities in the public markets, while others are focused on private assets to generate returns, BlackRock says.
Other highlights include:
Higher rates have fundamentally changed fixed income and cash markets; geopolitical volatility and supply chain constraints have compelled investors to reassess their geographic exposures; and a growth slowdown and higher market volatility have led many investors to re-evaluate their growth exposure across public and private markets.
Family offices are pursuing more tactical opportunities to capture alpha from an evolving market landscape, which is driving more frequent portfolio reviews and external input.
High-return alternative investments continue to be a focus, but family offices are looking to diversify their private market allocations.
Family offices are seeking external resources to unlock opportunities.
High-return alternative investments continue to be a focus, but family offices are looking to diversify their private market allocations.
The sharp fall in public markets in 2022 exacerbated the denominator effect, pushing many institutions to reduce their private market allocations. In contrast, family offices continue to show a strong preference for private markets, with most looking to maintain or increase and diversify their allocations, BlackRock writes. Performance of alternatives allocations in 2022 was viewed positively, except for hedge funds, which underperformed for over a third of the respondents.
Private markets will remain critical during the current business cycle, just as they were during the pro-growth cycle of the 2010s, but the weight of emphasis on different themes is likely to shift, according to the report. Infrastructure is an area of particular focus, with 42 per cent of respondents intending to increase their allocations to this subsector. This is followed by private credit (28 per cent of respondents intend to increase allocations), private equity direct deals (23 per cent), private equity funds (22 per cent) and real estate (8 per cent).
With liquidity likely to continue to command a premium in private equity and private credit markets, family offices are also looking for opportunities to put their large capital pools to use in areas that offer compelling yield profiles.
