Key Takeaways:
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- Over 50% of 175 family offices surveyed by BlackRock are optimistic about private credit, with nearly one-third planning to increase allocations this year.
- Interest in infrastructure investments is also growing, with 30% of family offices planning to commit more funds, particularly in decarbonization and AI-related projects.
- Private equity remains a core investment but faces declining enthusiasm due to lackluster performance, delayed exits, and reduced returns, prompting investors to be more selective about managers and fees.
- BlackRock is expanding its private markets footprint, with$28 billion in acquisitions, including private credit firm HPS Investment Partners and Global Infrastructure Partners.
What Happened?
A survey by BlackRock revealed that family offices, managing the wealth of the ultra-rich, are increasingly turning to private credit as an alternative investment. Over half of the respondents expressed optimism about private credit, and nearly one-third plan to boost their allocations this year. Private credit’s appeal lies in its potential for higher yields compared to public bond markets and its ability to diversify portfolios.
Infrastructure investments are also gaining traction, with 30% of family offices planning to increase exposure, particularly in areas like decarbonization and AI-driven projects such as data centers.
While private equity remains a significant part of family office portfolios, accounting for up to 50% in some cases, sentiment has turned mixed. Seventy percent of respondents were neutral to bearish on private equity, citing challenges like poor performance, delayed exits, and reduced capital returns. Investors are increasingly favoring secondaries, direct investments, and co-investments in private equity.
Why It Matters?
The shift toward private credit and infrastructure investments reflects changing priorities among the ultra-wealthy, who are seeking alternatives to traditional private equity amid its recent struggles. Private credit, in particular, has emerged as a hot trend on Wall Street, minting its own class of billionaires and attracting high-profile investors like Andre Koo Jr. and the Reuben brothers.
This trend also underscores the growing importance of alternative investments, which now make up 42% of family office portfolios, up from 39% in 2022-2023. The focus on infrastructure aligns with global trends in decarbonization and AI, highlighting how family offices are positioning themselves for long-term growth in transformative sectors.
BlackRock’s aggressive expansion into private markets, including its$12 billion acquisition of HPS Investment Partners, signals its commitment to competing with industry leaders like Blackstone and Apollo Global Management.
What’s Next?
Family offices are expected to continue diversifying their portfolios, with private credit and infrastructure likely to see increased allocations. The focus on decarbonization and AI-related projects suggests a long-term shift toward investments in transformative technologies and sustainable initiatives.
BlackRock’s push into private markets will be closely watched as it integrates its recent acquisitions and competes for dominance in the alternative asset space. The firm’s ability to capture a larger share of the private credit and infrastructure markets will be critical to its growth strategy.
Meanwhile, private equity managers may face increasing pressure to deliver better returns and justify their fees as family offices become more selective about their investments.
