Family Offices Boost Private Credit Allocations by 30%

Family offices are increasingly turning to private credit as a top alternative investment, according to a recent survey by BlackRock. The survey, which included 175 family offices globally, revealed that more than half of the respondents have a bullish outlook on private credit, with nearly one-third planning to increase their allocations to this asset class this year. This shift is part of a broader trend among the super-rich to diversify their investment portfolios, with alternative investments now comprising 42% of family office portfolios, up from 39% in a prior survey.

Armando Senra, head of the Americas institutional business at BlackRock, noted that family offices are diversifying their exposure within private markets. While private equity growth has traditionally been a primary focus, there is now a high interest in private credit and a growing interest in infrastructure. The survey found that 30% of respondents plan to commit more of their money to the infrastructure market, particularly in areas related to decarbonization and AI plus data centers.

Lili Forouraghi, BlackRock’s head of family offices, health care, endowments, foundations and official institutions in the US, highlighted the appeal of private credit for generating higher yields than public bond markets. She also noted the increasing interest in infrastructure investments, especially those related to decarbonization and the development of AI and data centers. These areas have intrigued many clients due to their potential for long-term growth and stable returns.

The survey also revealed that private credit holdings make up anywhere from 15% to 30% of some family offices’ portfolios. This trend is driven by the search for higher yields in a low-interest-rate environment and the desire for greater diversification. Private credit offers attractive returns and the potential for steady income streams, making it an appealing option for family offices looking to enhance their portfolios.

BlackRock's strategic focus on expanding its private investment businesses is also noteworthy. The firm has set ambitious goals to nearly double its market value by 2030, with a significant emphasis on private investments. This aligns with the growing interest in alternative assets among family offices and other high-net-worth investors. By expanding its private investment offerings, BlackRock aims to capitalize on the increasing demand for these assets and solidify its position as a leading provider of investment management services.

The survey underscores the importance of risk management in the current investment climate. Family offices are increasingly prioritizing risk management strategies to navigate market volatility and economic uncertainties. This focus on risk management is crucial as family offices seek to protect their wealth and ensure long-term financial stability. The survey's findings suggest that family offices are adopting a more cautious approach to investing, with a greater emphasis on diversification and risk mitigation.

In addition to private credit, family offices are also exploring other alternative assets, such as infrastructure and real estate. These investments offer the potential for long-term growth and stable returns, making them attractive options for family offices looking to diversify their portfolios. The trend towards alternative assets is likely to continue as family offices seek to optimize their investment strategies and achieve their financial goals.

Overall, the survey by BlackRock provides valuable insights into the investment preferences of the super-rich and the growing importance of alternative assets in their portfolios. As family offices continue to allocate more funds to private credit and other alternative investments, they are positioning themselves to capitalize on new opportunities and navigate the challenges of the current investment landscape.