Wealthy Families Shift Investments from Public Markets to Alternatives as Patient Capital Yields Higher Returns

Family offices, the private investment arms of wealthy families that manage over $6 trillion in assets worldwide, are increasingly moving their investments out of public markets and into alternatives such as private equity, real estate, venture capital, hedge funds, and private credit. According to a recent report by JPMorgan Private Bank titled “Global Family Office Report,” large family offices now have nearly half (46%) of their total portfolio invested in alternative assets, while publicly traded stocks account for only 26% of the investments. American family offices with over $500 million in assets are even more concentrated in alternatives at a whopping 49%. The report surveyed 190 single-family offices globally and found that these families’ longer time horizons, investing for up to a century or more, allow them to benefit from the “liquidity premium” of higher returns due to their patient capital. Family office clients with backgrounds as successful entrepreneurs often use these investment opportunities in private companies to apply their experience towards helping businesses grow by taking ownership stakes. The report also revealed that less than half (45%) of family offices have an overall return target, and among those who do, the median is 8%. Still, three-quarters use various benchmarks for evaluation purposes; customized ones are preferred by larger families’ investment managers to construct portfolios more efficiently. The report also highlighted that cybersecurity has become a significant concern for family offices with over four in ten (40%) considering it their biggest “gap” in capabilities, and nearly one-quarter have experienced a hacking attack already.