The appeal of illiquidity premia and differentiated return streams have incentivized family offices to increase their allocations to alternatives — the asset class now makes up 42% of their portfolios, up from 39% in 2023, according to a survey by BlackRock Inc.
The survey, which polled 175 single-family offices that collectively have $300B in assets under management, found half (51%) felt positive about the prospects of the private credit asset class. Roughly a third (32%) said they plan to increase allocations to private credit in 2025-2026, the highest figure for any alternative asset class. The survey also noted that within private credit, family offices have a clear preference for special situations/opportunistic and direct lending.
Three-quarters (75%) also view the prospects of the infrastructure asset class positively, with 30%noting they plan to increase their allocations in this sector in 2025-2026, with a preference toward opportunistic and value-add strategies, rather than core and core-plus.
By contrast, just 30% were bullish on prospects for the private equity asset class into 2026, with many citing
high fees (72%) as a main challenge to investing in private markets, followed by lack of attractive valuations (47%), managing liquidity (44%), lack of transparency (42%), accessing best deals/managers (37%), complex tax treatments (18%), and internal challenges (18%).
More than half noted gaps in their internal expertise around private market analytics (75%), deal-sourcing (63%), and reporting (57%). While others said they’re looking to streamline their relationships with investment managers to improve efficiency, including using and an outsourced chief investment officer (22%).
As well, a majority of family offices indicated that they would consider using artificial intelligence tools for a variety of tasks from risk management to cash flow modeling. However, respondents were far more likely to invest in technology firms building AI solutions (45%), or in investment opportunities that will benefit from the growth in AI (51%), rather than deploying AI tech internally to improve the investing process (33%).
While more than half (57%) family offices were already skiddish about the global outlook and another 39% were concerned about the possibility of a U.S. slowdown, those numbers increased once the U.S. announced tariffs against all of its trading partners (62% and 43%, respectively). The tariff announcements have also led many to question whether they can achieve their return targets. Prior to the announcement, 64% of
respondents expressed confidence in hitting their target returns for 2025-2026; however, the percentage has dropped to 51% since then.
Uncertainty, both on the domestic and geopolitical front, has nearly two-thirds (64%) of respondents looking to improve portfolio diversification. Just a third (33%) said they’re wholly comfortable with their portfolio liquidity. Meanwhile, a majority said they’ve already made changes to allocations, or had plans to do so, prior to the tariff announcements. Nearly three-quarters (72%) said they have or are planning to make changes to portfolio allocations, while nearly all (94%) noted they’re either making changes or looking for opportunities to do so.
Fewer than one in five said they’re moving to risk-on positioning, while more are diversifying (64%) and managing liquidity (33%) where possible, including by raising cash, moving to the front end of the yield curve, and looking to secondary markets. The main beneficiaries of family offices’ push for diversification and downside mitigation include illiquid (71%) and liquid (37%) alternatives, ex-U.S. equities (59%), cash (29%), and crypto (14%).
