FAMILY OFFICES: Goldman finds family offices have less private equity exposure

Some of the world’s richest families are less exposed to private equity as they lean more heavily on public markets, with surging prices underscoring stocks’ value as a consistent wealth engine.

Single-family offices allocated 31 per cent, on average, of their investment portfolio to public equities according to a Goldman Sachs Group survey of 245 global family offices. That was up from 28 per cent in 2023, the last time the bank did the survey.

The increase is partly due to soaring values, with the S&P 500 Index up almost 50 per cent over the past two years. But it also reflects wealthy investors’ faith in stocks as the best asset for beating inflation, a key goal of such investment firms that operate with multi-generational time horizons.

Family offices were generally willing to embrace risk, the survey suggested, and have been prepared to move quickly during moments of market turmoil such as President Donald Trump’s unveiling of tariff rates in April, said Sara Naison-Tarajano, global head of private wealth management capital markets.

“Family offices jumped in at ‘Liberation Day’ with two feet, two arms, the whole head,” she said at a bank event Tuesday in New York.

The average allocation to private equity, which the survey defined as buyout, growth and venture capital funds, dropped to 21 per cent from 26 per cent. It was still the second-largest asset category, ahead of cash, fixed income and hedge funds, whose allocation remained flat from 2023 at 6 per cent.

The allocation to private credit grew to 4 per cent from 3 per cent, which sounds modest but represented a one-third increase in raw terms, Naison-Tarajano said. Amost three-quarters of the survey’s respondents were invested in private credit in some form.

Families have channelled more money to private credit as an increasing number of companies choose to stay private for longer, leading to greater need for non-traditional financing.

For family offices, direct lending provides a cash yield, potential tax advantages and possibly better downside protection, since they can afford to be high up in the capital structure. Families have been weighing those factors against concerns over credit quality and overcrowding in the market, according to the report.

In terms of sectors, 58 per cent of family offices reported being overweight technology, with 86 per cent reporting some degree of exposure to artificial intelligence, mostly by way of public equities.

A growing number of families are invested in cryptocurrency – 33 per cent compared with 26 per cent two years ago – though 44 per cent said they have no interest in it.

More than two-thirds of the family offices that participated in the survey had a net worth of at least US$1 billion. Of the respondents, 47 per cent were from the Americas with the remaining split between Asia and EMEA.