Private credit is the most in-demand asset class among family office investors, a new report has found.
Six in 10 are looking to increase their exposure to private credit in 2024 and just 7 per cent are seeking to cut their allocation, according to Hedgeweek’s latest publication, Family Offices: A New Era of Growth.
[See also: Five forces shaping private equity for UHNWs in 2024]
Investors are drawn by its diversification benefits and promise of returns in a higher-rate environment, notes Will Wainewright, Spear’s contributor and head of research at Hedgeweek.
The findings reflect the conclusions drawn by other reports, including the The European Family Office Report 2023, published by Campden Wealth in partnership with HSBC Global Private Banking, which note that family offices plan to increase their alternatives allocation over the next 12 months.
The growth in alternatives
The majority of family offices already have exposure to alternatives. According to Fundraising from Family Offices: A guide to raising capital by London-based investment data company Preqin, Asia represents the biggest buy-in, with 74 per cent of family offices reporting exposure to alternatives. This is followed by Europe (69 per cent) and North America (57 per cent). The broadly defined 'rest of the world' has levels equal to that of Asian family offices.
[See also: Number of family offices triples in four years]
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Private credit appears the most attractive asset class, with a net 55 per cent of Hedgeweek survey respondents indicating that they want to increase exposure. This is followed by private equity (net 35 per cent) and real estate (net 25 per cent). At the other end of the scale are equities (net 9 per cent) and cash (net 2 per cent).
‘The rising interest in private credit within our asset allocation strategy is driven by several factors,’ explained Bruno Schneller, managing director at INVICO Asset Management, a family office and wealth manager in Zurich, and one of the experts quoted in the report.
[See also: Family offices place more value in outsourcing]
‘Firstly, private credit offers attractive risk-adjusted returns, especially in an environment where traditional fixed income yields may be low. Additionally, private credit provides diversification benefits and can offer a hedge against market volatility. The ability to structure bespoke financing solutions also allows for better alignment with our investment objectives and risk appetite.’
David Helgerson, head of impact and investment at Hamilton Lane, noted that ‘we are certainly seeing more flows from private wealth channels into the private markets world’ and that ‘broader access to private markets, from credit to equity to secondaries, is definitely picking up’.
The report also observes a ‘solid’ interest in allocations to hedge funds. This is stronger among multi-family offices than single family offices, and among North American offices compared to their European counterparts.
