Family offices have emerged as key players in the alternative investments space, capturing the attention of fund managers and high-net-worth investors alike.
According to recent insights published by Preqin, the number of family offices has surged, more than tripling since 2019 to reach 4,592 in 2023. And an increasing number are allocating their capital to alternative investments.
The report suggests a significant shift. The proportion of searches for private equity and VC strategies declined from 71.7% in 2022 to 54.8% in 2023. While core asset classes appear to be on a growth trajectory; private debt saw an increase from 8.3% to 12.4% of fund searches, while hedge funds rose from 5% to 10.7%. Likewise, infrastructure and real estate showed upticks as well.
The data demonstrates a growing appetite for a well-diversified approach to investments featuring a range of alternative asset types, a trend those in the alternative asset space predict will expand across the investment space as a whole.
Data from KKR compounds the promising outlook highlighted by Preqin, showing that family offices are gearing up to enhance their allocations to alternative investments. KKR found the average portfolio is set to allocate 52% to alternative investments in 2024. This a noticeable increase from 42% in 2022.
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Matt Ong is the CEO and Founder of Ctrl Alt, a B2B alternative asset infrastructure provider. One of Ctrl Alt’s products is its Terminal Platform, which provides a marketplace of tokenised assets from private equity to green energy for the likes of family offices to fractionally invest in.
“The rising demand for the specific risk-reward spread that alternative assets can bring to portfolios is a sign of things to come across the investment space,” said Ong. “While private equity and venture capital have traditionally served as gateways to alternative investments, the challenges of 2023 prompted a pivot towards less saturated asset classes in addition.
“As family offices transition their focus from wealth creation to wealth retention, their strategies centre more than ever on building deep and strong relationships. At Ctrl Alt, we’re seeing a rise of inbounds from Family Offices looking to access more diverse assets from their clients. Investors are keen to find better ways to access the returns that alternative assets typically offer.
“Part of this increase comes from younger generations looking to invest in assets such as films and green energy projects that speak to their interests and values. We’re already seeing interest grow and I predict we’ll see a much wider interest in alternative assets, and from a wider variety of investors, as the year goes on.”