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Which alternative assets do family offices prefer?

News Team, 14/06/2019

Preqin, the data and information provider for alternative asset professionals, has released new details showing how family offices are investing in funds.

Family offices are notable investors in alternative assets. In a report, titled “How are family offices investing?”, Preqin has tracked 1,000 family offices with active investment mandates and contrasted the investment behaviour of these offices in 2019 to three years ago in 2016.

The report shows that a majority of investors are targeting private equity and real estate, with 61 percent and 57 percent respectively investing in these sectors. The amount of investors allocating resources into real estate has increased by eight percentage points in the three-year window between 2016 and 2019. By contrast the total targeting hedge funds essentially remains the same, and only 19 percent are focusing on manufacturing. This replicates a wider trend across private capital and also suggests that family offices’ interest in alternative investments is growing.

According to the report, family offices’ median current allocations are highest in private equity, at 19 percent, and in hedge funds at 17.5 percent. Infrastructure and natural resources meanwhile, only attract three percent and five percent of allocations.

Preqin argues in the report that family offices have more flexibility than other investor types, and consequently have the capacity to deploy larger proportions of their total assets to asset classes higher up the risk and return spectrum. Over the course of the next 12 months, family offices active in real estate are primarily targeting investment in high-risk and high-return opportunistic strategies and value-added strategies, with 27 percent utilising strategies centred around those two categories. By contrast, only three percent of investors are targeting a strategy built around secondaries.  

There has also been a six percentage point increase since 2016 in family offices with assets under management in the $100-499 million range. Aside from this increase, the percentage of family offices in each various size bracket has essentially remained the same across the board. As funds with less than $100 million dollars remain at 13 percent, it suggests that there has been a slight shift towards smaller funds as the percentage of family offices with assets under management in the four larger brackets above $500m have all decreased by 1 or 2 percentage points.

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