Family Offices Increasing Allocation to Alternatives in 2023: KKR Survey
Family offices around the world are making significant shifts in their investment strategies, according to a recent survey conducted by KKR. The survey of 75 chief investment officers revealed that family offices are increasingly turning to alternative investments, with 52% of their portfolios allocated to alternatives in 2023, up from 42% in 2022.
This move towards alternatives is coming at the expense of traditional asset classes, as cash holdings decreased from 11% to 9% and holdings of publicly traded stocks fell from 32% to 29% from 2022 to 2023. The survey indicated that family offices are looking to increase their exposure to private market investments in 2024 to take advantage of the illiquidity premium.
Family offices, which are private investment vehicles for wealthy families, are shifting away from public markets towards private equity, real estate, and other alternative investments. With longer time horizons and a preference for assets that will grow over multiple generations, family offices are able to invest in private businesses and alternatives that offer a premium for patient capital.
In the current market environment, family offices have a unique advantage as banks and traditional lenders are pulling back on loans to companies. Many institutional investors are also shying away from private equity and venture capital, creating opportunities for family offices to play offense and invest in sectors where they have expertise.
According to the survey, family offices plan to continue moving capital from cash and stocks into alternatives in the coming year. Private credit, infrastructure, private equity, and commodities are among the favored alternative investments, with a focus on sectors like data centers, logistics, and oil and gas.
Overall, family offices are taking a proactive approach to their investment strategies, seizing opportunities in the market and positioning themselves for long-term growth. The shift towards alternatives reflects a broader trend in the investment landscape, as investors seek higher returns and diversification beyond traditional asset classes.
