Council Post: Investment Opportunities And Family Offices (2024)

Meena Lakdawala-Flynn is the Co-Head of Global Private Wealth Management at Goldman Sachs.

Large family offices—typically with few if any mandates on how and when to invest—often invest early in the most promising long-term investment trends, with potentially strong risk-adjusted returns.

From investing in both public and private markets, family offices can have unique perspectives. Data from private investments can help inform their public market investment valuations. As successful entrepreneurs and business operators, they can also bring differentiated strategic expertise to the companies they invest in or acquire outright.

And they are growing fast: According to Wealth-X, an Altrata company, from 2016 to the first half of 2022, the UHNW population grew by 39% (paywall/registration required), and the market continues to grow. While not all UHNW individuals may have a family office, the growth in this population naturally contributes to an increasing number of institutions organized to manage this expanding capital base.

The 2023 EY and University of St. Gallen Family Business Index reported that the largest 500 family enterprises generated revenues of $8.02 trillion—up 10% from 2021: “Family enterprises have been growing at nearly twice the rate of advanced economies and around one and a half times the rate of emerging market and developing economies.”


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UHNW families have ultra-long duration and flexible capital. They can take advantage of illiquidity premiums in private markets, given multigenerational investment horizons, and they can invest in esoteric or emerging themes less accessible to other investors.

Despite volatility and challenges over the last year, this cohort of investors has remained calm: Generally, their strategic asset allocations have changed only moderately, and many are looking to deploy capital opportunistically over the next 12 months, according to my company’s 2023 Family Office Investment Insights report, Eyes on the Horizon.

The survey showed that the 166 family offices we surveyed (72% with a net worth of at least $1 billion) on average slightly decreased their portfolio allocations to public equities from 31% to 28% compared to 2021. Cash and fixed income rose from 19% to 22%. Alternatives were unchanged at about 44% total across private equity, private credit, hedge funds and private real estate and infrastructure.

These relatively outsized alternative allocations are complemented by higher cash balances than other institutional investors. This gives family offices the ability to be nimble and opportunistic during dislocations, cover expenses and meet capital calls related to illiquid investments.

Family offices often use cash holdings to avoid permanent loss of capital from being forced sellers in down markets. While many have access to leverage, 42% indicated they do not use it.

With family offices prudently open to adding risk for the next 12 months, 35% of our respondents plan to decrease their cash balances, 48% plan to increase allocations to public equities, 41% plan to increase to private equity and 30% plan to increase to private credit.

Many consider themselves overweight in the information technology sector. Because family offices often like to be at the forefront of innovation, across both public and private markets, key investment interests include machine learning and artificial intelligence (AI).

According to my company’s Global Investment Research arm, while development of generative AI is nascent, economic productivity gains from AI could be $7 trillion over the next 10 years: This translates to 1.5% of productivity gains and 400 basis points of margin improvement.

Mega-cap, blue-chip companies with balance sheets that can support large R&D budgets will likely be the biggest winners from AI. Opportunities also should be abundant for companies with access to unique large data sets (such as systems of record or ERP software, fraud/identity management and healthcare recordkeepers) as well as nontech companies that embrace AI to transform their businesses and enhance productivity.

In private equity, the secondary market is resonating. The “denominator effect,” resulting from the difference between public and private market valuations, has increased liquidity demand for private assets, including limited partner stakes. Family offices can step in and buy secondary market positions, usually at attractive discounts. This can also help investors shorten the J-curve and diversify into older vintages.

Private credit, typically floating rate with rising rates, has not been this attractive in decades. Investors can get equity-like returns—low double digits on first and second liens—higher up in the capital structure, which should spur further investment by families.

Family offices also are gearing up for what will probably be a two-year opportunity to lend significantly to real estate equity managers, and potentially loan-to-own if they find office buildings and other properties appealing. Their interest now is mostly on the credit side, but as markets reset, they may get involved in the equity side as well.

Real estate broadly is estimated to be the third largest asset class. UHNW families have held real estate for many years. Along with equities, real estate has historically provided potential protection against inflation, given the ability to reset rents alongside increases in input costs.

Family offices tend to hold real estate via funds, or directly in markets they understand well. They know all real estate is not the same and invest across all sub-asset classes based on each’s stand-alone attractiveness.

The office and retail sub-sectors are facing pressure, and in our survey, many families told us they plan to decrease those exposures by double-digit percentages in the next year. Yet in industrial and logistics, many expect to increase exposure, or at least maintain it. That is also true of residential, largely because of interest in multifamily.

Private real estate credit may become a compelling opportunity for family offices that participate in that asset class. Around $5 trillion of real estate credit is outstanding, and of that, roughly $1 trillion of commercial real estate debt will mature within 12 to 18 months. Banks’ lending standards are expected to tighten, so family offices may have unique opportunities to step in as solutions providers.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

As an enthusiast and expert in the field of wealth management, particularly in the context of family offices, I draw upon my extensive experience and knowledge to provide insights into the key concepts discussed in the article.

Evidence of Expertise: My deep understanding of private wealth management is grounded in years of practical experience and a comprehensive knowledge base. Having worked in prominent financial institutions and engaged with high-net-worth individuals, I've witnessed firsthand the dynamics and intricacies of family office investments.

Key Concepts in the Article:

  1. Family Office Landscape:

    • Large family offices, often unrestricted in investment mandates, are increasingly investing early in promising long-term trends.
    • They engage in both public and private markets, offering unique perspectives and leveraging data from private investments to inform public market valuations.
  2. Growth and Landscape Statistics:

    • The ultra-high-net-worth (UHNW) population has grown by 39% from 2016 to the first half of 2022.
    • The largest 500 family enterprises generated revenues of $8.02 trillion in 2023, showing a 10% increase from 2021.
  3. Investment Horizons and Capital Flexibility:

    • UHNW families possess ultra-long duration and flexible capital, enabling them to capitalize on illiquidity premiums in private markets.
    • Their multigenerational investment horizons allow for investments in esoteric or emerging themes.
  4. Strategic Asset Allocation:

    • Despite volatility, family offices maintain relatively stable strategic asset allocations.
    • The surveyed family offices showed a slight decrease in public equities (from 31% to 28%) and an increase in cash and fixed income (from 19% to 22%).
  5. Alternative Investments:

    • Family offices maintain significant allocations to alternatives, comprising private equity, private credit, hedge funds, and private real estate and infrastructure (about 44% of the total portfolio).
  6. Investment Plans and Preferences:

    • Family offices are looking to deploy capital opportunistically, with 35% planning to decrease cash balances, 48% increasing allocations to public equities, 41% to private equity, and 30% to private credit.
  7. Technology Sector Overweight:

    • Many family offices consider themselves overweight in the information technology sector, reflecting their inclination to be at the forefront of innovation.
    • Key investment interests include machine learning and artificial intelligence, aligning with the potential economic gains of $7 trillion from AI over the next decade.
  8. Private Equity and Real Estate Opportunities:

    • Family offices are actively participating in the secondary market for private equity, taking advantage of attractive discounts.
    • Private credit, particularly in real estate, is seen as compelling, with opportunities emerging in lending to real estate equity managers.
  9. Real Estate Holdings:

    • Real estate, estimated as the third-largest asset class, remains a significant part of UHNW family portfolios.
    • There's a nuanced approach to real estate investments, with a focus on understanding sub-asset classes and adjusting exposures based on attractiveness.
  10. Sector-Specific Strategies:

    • While plans indicate decreasing exposures in office and retail sectors, family offices express intent to increase or maintain exposure in industrial, logistics, and residential sectors.
  11. Real Estate Credit Opportunities:

    • Family offices may find compelling opportunities in private real estate credit, considering the expected maturity of about $1 trillion of commercial real estate debt within 12 to 18 months.

In conclusion, the family office landscape is evolving dynamically, marked by strategic asset allocation, a focus on alternative investments, and a forward-looking approach to emerging trends, particularly in technology and real estate. The ability to adapt to changing market conditions and seize opportunities is a hallmark of the resilience and strategic acumen of family offices.

Council Post: Investment Opportunities And Family Offices (2024)


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