The Shifting Allocation Strategies of Family Offices: From Private Equity to Public Markets and Beyond

In an era marked by geopolitical tensions, inflationary pressures, and regulatory shifts, family offices are recalibrating their investment strategies to navigate heightened uncertainty. The period from 2023 to 2025 has seen a notable reallocation of capital from private equity to public markets and alternative assets, driven by evolving risk-return dynamics and the pursuit of liquidity. This strategic rebalancing reflects a broader industry trend toward diversification, as family offices seek to mitigate downside risks while capitalizing on emerging opportunities.

The Private Equity Rebound and Its Limits

Private equity (PE) has long been a cornerstone of family office portfolios, offering high returns through long-term value creation. However, the sector faced headwinds in 2023 due to elevated interest rates and regulatory scrutiny. By 2025, however, PE dealmaking has rebounded, fueled by lower rates and deregulation, with $2.62 trillion in dry powder globally2025 Global Investor Survey: Navigating Private Markets^[3]. Despite this, family offices are scaling back their allocations. According to the UBS Global Family Office Report 2025, private equity accounted for 21% of portfolios in 2024, but 60% of family offices plan to reduce this to 18% in 2025, citing higher financing costs and reduced direct investment opportunitiesUBS Global Family Office Report 2025: all eyes on the ...^[1]. This shift underscores a pragmatic approach: while PE remains a key asset class, its role is being tempered by the need for liquidity and shorter investment horizons.

The Rise of Public Markets and Thematic Opportunities

Public markets have gained renewed traction as family offices seek to harness growth in sectors like artificial intelligence (AI) and longevity. By 2025, developed market equities are projected to account for 29% of family office portfolios, up from 26% in 2024UBS Global Family Office Report 2025: all eyes on the ...^[1]. This trend is driven by the availability of public market exposure to high-growth areas previously dominated by private equity. For instance, AI-driven infrastructure and renewable energy projects are now accessible through listed vehicles, offering family offices a more liquid and transparent alternative to private investments. Additionally, the IPO market, though still recovering, is showing signs of life, with private equity firms preparing for exits as market conditions stabilizeAlternative Investments in 2025: Our top five themes to watch^[2].

Alternative Assets: Diversification Beyond Traditional Boundaries

Family offices are increasingly turning to alternative assets to enhance diversification and capture uncorrelated returns. Private credit, in particular, has emerged as a favored option, with 32% of family offices planning to boost allocations in 2025UBS Global Family Office Report 2025: all eyes on the ...^[1]. This asset class offers attractive yields (projected at 7.6% annually by Citi2025 Global Investor Survey: Navigating Private Markets^[3]) and provides liquidity through tailored financing structures. Real estate and infrastructure also remain critical, with U.S. family offices allocating 18% to real estate in 2024, while 30% plan to increase infrastructure exposureUBS Global Family Office Report 2025: all eyes on the ...^[1]. These sectors benefit from structural demand, such as the U.S. housing shortage and AI-driven energy bottlenecks, which create long-term value appreciation potentialAlternative Investments in 2025: Our top five themes to watch^[2].

Gold, too, has reemerged as a strategic holding. Hedge funds like Warah Capital now allocate 15-20% of portfolios to gold, leveraging its negative correlation with the U.S. dollar and its role as a safe-haven assetGold Hedge Fund Investment Strategies in Economic Uncertainty^[4]. Central bank purchases and declining faith in fiat currencies have further bolstered gold's appeal, making it a key component of risk diversification strategiesGold Hedge Fund Investment Strategies in Economic Uncertainty^[4].

Risk Diversification: Active Management and Multi-Strategy Approaches

To navigate volatility, family offices are adopting active management and multi-strategy approaches. According to the UBS report, 40% of family offices globally prioritize active management to enhance diversificationSingle-family offices 2025 outlook^[5]. Hedge funds and private market strategies are gaining traction, offering lower correlation with public markets and greater control over risk parameters. Thematic investments in AI, renewable energy, and longevity are also being deployed to capture long-term growth while mitigating sector-specific risksUBS Global Family Office Report 2025: all eyes on the ...^[1].

Moreover, multi-strategy and global macro hedge fund strategies are being utilized to generate uncorrelated returns in turbulent environmentsSingle-family offices 2025 outlook^[5]. These strategies allow family offices to hedge against macroeconomic shocks while maintaining exposure to high-growth areas.

Conclusion: A New Paradigm for Family Office Portfolios

The shifting allocation strategies of family offices reflect a nuanced response to a high-uncertainty environment. While private equity remains a core asset class, its role is being redefined by the rise of public markets and alternative investments. The emphasis on liquidity, diversification, and active management underscores a broader industry shift toward resilience and adaptability. As global markets continue to evolve, family offices that embrace this strategic rebalancing will be better positioned to navigate volatility and preserve intergenerational wealth.