Family Offices Boldly Invest in Alternatives, Defying Institutional Trends - Spock Reports

Logical Move: Family Offices Pour More into Alternatives

In a surprising twist family offices are bucking the trend followed by institutional investors by increasing their investments in alternative assets. According to a new study by KKR family offices now have 52% of their portfolios allocated to alternatives up from 42% the previous year. This growth comes at the expense of other asset classes with cash holdings dropping to 9% and publicly traded stocks falling to 29%.

Embracing the Illiquidity Premium

Family offices known for their longer time horizons are taking advantage of the illiquidity premium offered by private market investments. Unlike other investors who prioritize liquidity family offices are able to invest in assets that will grow over multiple generations. This approach allows them to dive into private equity real estate and other alternative investments that pay a premium for patient capital.

Family Offices: The Rebel Investors

While traditional lenders are tightening their lending standards family offices are stepping up to fill the gap. With banks pulling back on loans to companies family offices have a unique advantage in the current market. This advantage combined with their willingness to take risks and invest in sectors they have expertise in puts them in a prime position to play offense while others are in need of liquidity.

Shifting Capital and Expanding Horizons

Family offices have big plans for 2024. According to the survey 42% of family offices plan to reduce their cash holdings while 31% plan to trim their equity investments. Their top choices for alternative investments include private credit infrastructure private equity and commodities. Additionally they are eyeing the real estate market specifically data centers logistics warehouses and oil and gas sectors.

Tremendous Opportunities in Disrupted Sectors

As other investors are forced to sell their holdings in certain sectors family offices see this as an opportunity. The survey highlights the oil and gas sector as one where forced selling has created tremendous investment opportunities. By capitalizing on the current market dynamics family offices are able to identify undervalued assets and make strategic investments.

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