Family Offices Shift Focus to Private Markets
Family Offices Favor Private Markets over Public Stocks
Family offices, those private investing arms of families with substantial assets, have traditionally maintained a significant portion of their wealth in publicly traded stocks. However, this has changed in recent times. According to a survey conducted by Campden Wealth and RBC, family offices in North America now have more of their investments in private markets, surpassing their holdings in public stocks. The survey revealed that family offices had 29.2% of their investments in private markets, including private equity, venture capital, and private debt, compared to 28.5% in publicly traded stocks. This marks the first time in the survey’s history that family offices have favored private markets over public stocks.
“Family offices have maintained a consistent pattern of augmenting their allocations to private markets,” according to the study.
A Shift in Investment Focus
This shift in investment focus is noteworthy, as family offices have reduced their stock allocations from 31% the previous year, while private investments increased from 27%. The remaining assets are diversified into various categories, including cash, bonds, alternative investments, hedge funds, commodities, real estate, and more.
Future Investment Plans
Moreover, family offices are not merely content with this shift; they are planning to further concentrate on private markets in the coming months. The survey revealed that 41% of family offices intend to increase their allocations to private equity funds, and a third plan to invest more in direct private equity deals. Conversely, only 23% plan to add to their holdings in developed-market public stocks, while 15% plan to reduce their stock positions.
The Appeal of Private Markets
The move towards private markets underscores family offices’ belief in the long-term potential of these investments, which they perceive as offering better returns with reduced volatility compared to publicly traded stocks. Many family office founders, often successful entrepreneurs with experience in building and selling private companies, leverage their expertise to identify and support promising private ventures.
Challenges & Caution
However, it remains to be seen whether this shift will continue to pay off. Private equity funds are currently grappling with tight financing, expensive loans, and a scarcity of IPO exits. Additionally, as investors anticipate interest rate cuts in 2024, the stock market may continue its rally.
Top Investment Choices
When asked about their expectations for the best returns in the coming years, family offices ranked “private equity and venture capital” as their top choice, followed by public equities. This demonstrates their unwavering confidence in the potential of private markets.
Diversification into Alternative Assets
Apart from private markets, family offices are also showing increasing interest in alternative assets, including real estate and commodities. In terms of investment priorities for the upcoming year, “investing in alternative asset classes” emerged as the top choice.
Caution in Uncertain Times
Despite these investment shifts, family offices remain cautious about the future. Nearly 60% cited “recession risk” as the most significant financial concern, followed by tensions with China and concerns about “excessive Fed tightening.” This caution is reflected in their bond holdings, with a third planning to increase their bond positions.
Cash Reserves & Opportunity Awaits
Lastly, family offices are sitting on a substantial amount of cash, representing 9% of their assets, nearly double the levels in 2021. This cash reserve provides them with the flexibility to seize opportunities, whether in real estate, acquisitions, or further investments in private markets.
In conclusion, as we observe the dynamic changes in the wealth management landscape, it’s evident that family offices are seeking innovative strategies to optimize their investments. At Avestix, we understand that navigating this evolving terrain requires not only staying informed but also having access to the right tools and expertise. We can assist family offices and high-net-worth individuals in their wealth management journey through data-driven insights, risk management, portfolio diversification, expertise & advisory services, and strategic planning.
Our platform combines data-driven insights, expert guidance, and cutting-edge technology to empower you to make informed decisions and seize opportunities while managing risks effectively.
About Susan Lindeque
Susan is a visionary entrepreneur, futurist, and thought leader with over 35 years of experience in business, finance, investments, real estate, wealth creation, and technologies.
Her Massive Transformation Purpose is:
“Working to Inspire Abundance for Humanity & Invest in Exponential Technologies.”
She is the founder and CEO of Avestix Group, a global asset, investment, advisory, and technology company that focuses on public securities, next-venture capital, commercial real estate, and alternative assets based on ESG principles.
Susan is passionate about nurturing innovation, transformation, and disruption in the new decentralized economy. She leverages her extensive network and deep industry expertise to select and empower exponential technologies that will disrupt, transform, and impact industries.