Family Offices: where the ultra-wealthy are allocating

Family Offices: where the ultra-wealthy are allocating

This week it’s another look at family office Asset Allocation 📊

The insights come from the investment company KKR’s. 2023 Family Capital Survey. KKR surveyed 75 family office CIOs, asking about their allocations in 2023 and intentions for 2024

The key takeaways:

🔹 Family offices are planning to increase exposure to Alternatives in 2024, particularly in Private Credit, Infrastructure, and Private Equity

🔹There's a shift towards reducing Public Equities and Cash to fund these investments

🔹 The focus is on building expertise to get an edge in active investments. Family offices are aiming to improve return per unit of risk and take advantage of illiquidity premiums

🔹 Family offices are actively growing, adding investment, risk management, and sector expertise, and seeking partnerships with the 'right' General Partners (GPs) to expand their portfolios strategically

 🔹 There's a notable difference in investment strategies between older, established family offices, which heavily favor Private Equity, and younger offices, which are more exploratory in their global asset allocation

Asset Allocation

Family offices are generally long-term focused, leveraging a heavy allocation to alternatives to deliver outsized returns:

(Alternatives include Private Equity, Private Credit, VC/Growth, Hedge Funds, Real Estate, Infrastructure, and operating businesses)

The asset allocation of Family offices are characterized by some distinct factors:

• flexibility to withstand downturns

• a higher tolerance of illiquidity

• less of a requirement to generate near-term yield for income.

Net % of respondents planning to increase (decrease) allocations in 2024:

2024 looks to be the year that cash is being put to work

Family Offices are still heavy users of Alternatives, but their focus has shifted more towards real assets of late

Ultimate Goals of Family Offices

The primary focus of family office, (multiple answers allowed):

Family offices are increasingly using private market allocations, including insurance, to both boost returns and/or act as a source of diversification

The average age of family offices (a surprisingly young industry):

Either we are very early in the family office story or family offices are not enduring

Asset Allocation by age of family office, %

Asset allocation to private equity based on age of the family office:

While the KKR study is just a snapshot (and this is just a snapshot of their report), it covers a good range of family offices from around the world, with 20% of respondents managing more than $5 billion

Source: KKR 2023 Family Capital Survey. I would encourage you to read the full report here

𝕏 highlights

Some good answers here:

This week I’m doubling up on book recommendations:

Valentine’s special:

📚 what to read

It’s a small book but it packs a punch. I tweeted about it this week, so I wanted to share

In The Little Book of Valuation, Aswath Damodaran distills complex valuation principles into clear, actionable insights. A must-read for any investor. I still pick up my copy frequently

📻 what to listen to

The Money Talks podcast from the Economist talks about the biggest stories in finance, business and the economy. For me, well-curated informed discussions on podcasts always beat the hysteria of the daily news

Particularly interesting is the recent episode on Liverpool Football Club manager Jurgen Klopp and the importance of energy

📰 family offices news roundup

🔗 Asia's wealthy families invest to 'maintain lifestyle' and 'stay rich' - Nikkei Asia

🔗 America's Richest Families 2024

🔗 How to Grow a Family Office Without Losing the Personal Touch - Morning Star

🔗 Walton, Soros Family Offices Buy New Stakes in Biotech Firms - Bloomberg

🔗 Unlocking The Secret To Trustee Selection - Forbes

🔗 Billionaire Jeff Bezos sells over $2 billion worth of Amazon shares - Nairametrics

🔗 Why UK Family Offices are showing greater appetite for Oil and Gas - FT

And finally… 

I’ve been on the road this week with work. It involved incredible luxury, privilege and generosity. I’m feeling pretty lucky

But I’m homeward bound for the biggest privilege of all - a family meal ✈️

Here’s to a wonderful weekend 🍷👨‍👩‍👧‍👦 

See you on 𝕏

X

𝕏 @MrFamilyOffice

✉️ [email protected]