At Extreme Investor Network, we pride ourselves on being at the cutting edge of business news and trends. Today, we’re diving into the world of family offices and their investment strategies.
A new study has revealed some fascinating insights into how large family offices are allocating their investments. It turns out that these wealthy families are increasingly moving away from the stock market and towards private markets and alternative investments in search of higher returns and lower volatility.
According to the JPMorgan Private Bank Global Family Office Report, family offices have a substantial 46% of their total portfolio in alternative investments such as private equity, real estate, venture capital, hedge funds, and private credit. This represents a significant shift away from publicly traded stocks, where family offices had only 26% of their assets invested.
In the United States, the trend towards alternatives is even more pronounced. American family offices with assets exceeding $500 million had over 49% of their investments in alternative assets, with only 22% in public stocks.
So, why the move towards private markets? Family offices, with their longer time horizons (often spanning decades or even centuries), are able to take advantage of the liquidity premium offered by alternative investments. Unlike the stock market, where prices can fluctuate dramatically on a daily basis, private equity and other alternative assets tend to offer more stable valuations over time, smoothing out volatility.
One interesting finding from the report is that many family office founders started out as entrepreneurs who later sold their businesses. These founders are now using their family offices to invest in other private companies and leverage their experience to help these companies grow.
Looking ahead, William Sinclair, head of the U.S. Family Office Practice at JPMorgan Private Bank, predicts continued growth in family office investments in alternatives, particularly in areas like private credit and digital infrastructure.
As family offices expand their investment horizons, they are also looking to outsource more functions to external advisors to reduce costs. Additionally, cybersecurity is becoming a top priority for family offices, with many turning to firms like JPMorgan for help in protecting against cyberattacks.
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