Are you interested in finding out what Family Office CIOs have been investing in? Recently, the leading global Alternatives investment firm, KKR, released an insights report “Loud and Clear,” surveying 75 Family Office CIOs that manage an average of $3 billion in assets. Based on the findings from the report, this article reveals what preoccupies Family Office CIOs and the investment trends in the Family Office space this year.
Investment preferences
This report captured the shift in the investment landscape among Family Offices. Reportedly, Family Office CIOs are particularly fond of Alternative Assets this year, with a recorded 52% of assets being allocated to Alternatives on average, which is 2% up since 2020. Private Credit is said to be the most popular asset class in 2024, with 45% of respondents planning to increase their allocation this year.
Within Alternative Assets, along with the ever-popular Private Equity, Hedge Funds and Private Credit, the report stated that there is also a significant jump in allocations to Real Assets, which includes Real Estate, Infrastructure and Commodities. Notably, in 2023, Real Assets take up 15% of average total assets, compared to 11% in 2017. In contrast, Family Offices are reportedly moving away from Cash and Public Equity. It is believed that this is an indication of Family Office seeking diversification in their investment.
Similar but different
The report noted pronounced regional differences in investment. Reportedly, USA-based Family Offices are less fond of traditional Private Equity compared to their global counterparts, whereas Family Offices in the EMEA region see the highest allocation in Private Equity. On the other hand, American Family Offices own more Public Equity than others. The report also found that Asian Family Offices heavily allocated to Real Estate at 21% which is significantly higher than the average of 11% or less in other regions.
While there is a general trend within the Family Office space. The report also noted that Family Offices exhibit notable disparities in investment preferences, particularly evident in their stances on China and energy sectors. Many CIOs reported that they are repositioning their allocations within Asia, favouring India and Japan over China and Hong Kong. Conversely, attitudes towards energy investments vary across regions. European and Asian CIOs tend to prioritise Climate and Energy Transition funds, demonstrating little interest in traditional energy assets and aligning with socially responsible investing principles. Meanwhile, Family Offices in the US and Latin America display increasing enthusiasm for conventional energy assets like pipelines, LNG and natural gas production.
Concerns
Geopolitics has eclipsed inflation and became the main concern for Family Office CIOs in 2024, with more than 40% of respondents stating this was their main worry. This is a result of the ongoing war and conflicts in Europe and the Middle East. This shift reflects a recognition of the interconnectedness of global events and their profound impact on financial markets and asset valuations. At the same time, 93% of the CIOs cited growing assets for future generations as a focus for their portfolios. In light of this, Family Offices must adopt a multifaceted approach, leveraging diversified investment strategies, rigorous risk management practices and proactive engagement with geopolitical developments to achieve long-term wealth preservation objectives. This entails a nuanced understanding of geopolitical dynamics, adept asset allocation strategies and a commitment to cultivating resilience amidst evolving global challenges.
Commentary from Agreus
“This report supports our view that Family Offices have been preferring and deploying more capital to Private Markets as opposed to traditional asset classes. This has also been evident in the demand and the shortage of high-calibre investment talent within the Alternatives market. The Family Offices that do want to go down a direct approach and build the infrastructure in-house end up competing directly with global institutions from the same talent pool. This is usually an uphill battle for Family Offices, mainly due to the inability to offer more visible and achievable carried interests or similar forms of LTIPs, given their longer investment horizons.”
Tayyab Mohamed, Co-founder of Agreus
“Where the KKR report highlighted there was a higher allocation to Private Equity in the EMEA region compared to the USA, we have seen a different trend. We have seen a greater demand for Private Equity allocation across USA-based Family Offices compared to their EMEA counterparts. This has also driven a demand in hiring for Private Equity Investment specialists across the states. Globally the demand has been consistently higher for all regions however the appetite has been greater in the USA. This has also been reflected in our recent compensation benchmark surveys.”
Paul Westall, Co-founder of Agreus
In our previous article, we discussed the pivotal role of a CIO in a Family Office. An outstanding CIO will greatly impact the long-term success of the Family Office, and it is essential to find someone that fits perfectly with your Family Office.
Agreus is an established full-service resources and recruitment consultancy dedicated to working exclusively with Family Offices. For Family Offices seeking expert support in hiring a CIO who aligns seamlessly with their unique needs and values, Agreus stands ready to assist. With a proven track record in executive search and a deep understanding of the nuances of Family Office dynamics, Agreus can serve as your trusted partner in identifying and onboarding the perfect CIO candidate. For a more tailored conversation, please do not hesitate to get in touch.