Alternative assets now account for the majority of family office portfolio allocations, according to research from the Bank of New York’s private banking division.
BNY said that for the first time, the bank found that family offices were choosing to allocate less than half their portfolio on traditional assets like public equity and real estate.
Private equity, venture capital, and private credit, were all included in BNY’s definition of alternative assets, as were cryptocurrency and luxury assets, like art and jewellery.
Speaking to Spear’s, BNY’s head of international markets and family office Chuck Long said alternative investments had been ‘ramping up’ for several years, with artificial intelligence partly behind the increase.
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‘A lot of that asset class exposure is also a play on AI. The top four categories that we saw for investing were AI, renewable energy, healthcare, and then regular energy,’ he said, adding that energy and healthcare are both undergoing radical changes from AI’s impact.
BNY surveyed 290 family offices internationally for its research, with assets under management ranging from $250 million to over $5 billion. Ten per cent of the offices had AUM of over $5 billion, while 36 per cent were between $1 billion and $4.9 billion.
The report also found that private credit remains appealing to family offices, despite the well-publicised problems faced by some firms like Blue Owl Capital, which was forced to cap quarterly redemptions from one of its funds at 5 per cent last year.
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‘With family offices, it’s a little bit of a different investment outlook and approach than you’d find in the HNW or UHNW marketplace because their timeframes tend to be much longer,’ Long said, ‘so they have a different outlook. They’re able to maybe incur a little bit more of an illiquidity issue.’
Long added that younger generations were behind family offices’ increasing interest in luxury assets and sports investing.
‘In our study, art investment rose 63 per cent year on year,’ Long said. ‘Luxury assets tend to be a little bit more in vogue when there are inflation fears because it will create an inflation hedge, so the arts are kind of coming back into favour’.
He added: ‘Last year, every event I went to had a segment on sports investing, and that was the big topic. I think we’re now hitting a point where it’s becoming a lot more mainstream.’
