Nearly Half of Family Office Clients Prefer Alternative Assets
Avestix has been tracking data that confirms the family office (FOs) landscape is changing worldwide — a landscape Deloitte estimates will be valued at $9.5 trillion worldwide by 2030. For instance, we recently shared the news that women are playing a larger role in managing FOs around the globe. We also posted findings revealing that more FOs are leveraging AI and blockchain technology to enhance efficiencies.
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But the appeal of AI and blockchain isn’t limited to improving FO operations. As we observed, an increasing number of family offices also include Al- and blockchain-adjacent companies in the alternative asset recommendations they make to their high-net-worth clients. Another recent study — The 2024 Global Family Office Report — confirms the growing popularity of alternative assets among high-net-worth FO clients. “While public equity and fixed income holdings continue to provide solid portfolio cores, many family offices … remain very comfortable investing in alternative asset classes and investment strategies outside of traditional markets,” says the report.
The 2024 Global Family Office Report — which JP Morgan Private Bank issued earlier this year — determined alternative assets appeal to segments of the high-net-worth investors because those investors have “presumably higher risk tolerance and longer time horizons, on average” than rank-and-file investors. Another reason: FO clients typically have a “general ability to take on greater illiquidity risk.”
The Appeal of Alternative Assets
The 94-page report offers a comprehensive overview of family offices and their client demographics, governance structures, and staffing and operational costs. But, because it is based on surveys with 190 FO executives worldwide, it provides a boots-on-the-ground perspective of investing trends that is especially insightful. “The nature of alternative asset classes can be appealing, offering unique opportunities for alpha with less mark-to-market volatility,” says report researchers. “Many families also have backgrounds in building businesses, and are therefore often interested in investing in emerging companies and/or those aligned to their experience.”
Alternative assets appeal to FO clients, the report adds, because the investments “can offer the ability to take a controlling stake or exert more direct influence over the investments. The notable mean allocations to private equity and real estate, in particular, seem consistent with the relatively higher average target return expectations … These types of privately held assets also tend to fit well into the long-term, often even multigenerational investment horizons typically associated with family offices.” This appeal may explain why researchers determined that, among the FOs surveyed, nearly 47 percent of mean asset allocations are directed towards alternative investments, compared to public equities (26 percent) and fixed income and cash (21 percent).
The JP Morgan Private Bank study also found that — when it comes to deciding which asset allocations to support — nearly 90 percent of FOs surveyed say family members “are closely involved in investment decisions, usually led by a family principal or an investment committee that includes family members.” In nearly half of those cases, a family principal makes the final investment decisions. This is especially true of the U.S.-based FOs where 56 percent of investment allocations are decided by a family principal (compared to 26 percent of FOs in other countries).
Thirty percent of FOs surveyed say investment decisions are made by committee, with 94 percent saying these investment committees include at least one family member (if not more). Forty-four percent, meanwhile, say their committees also include third-party professionals not directly employed by the FO. Regardless of who makes the call as to final investment decisions, JP Morgan Private Bank’s FO data confirms alternative asset classes are proving to be especially popular with high-net-worth investors.
Next Steps
If you’re an accredited investor seeking insights into alternative investment opportunities, contact Avestix to determine which assets might be right for your portfolio.
