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Real estate and private debt are top choices as family offices turn to alternatives

Real estate and private debt are top choices as family offices turn to alternatives

12 April, 2023
Private Clients Family Office

Almost all family office investment managers say alternatives focus is a long-term trend for the sector

The strong performance of alternative assets is driving a long-term switch to investing in alternatives for the family office sector, new global research* from Ocorian, the specialist global provider of services to high net worth individuals, family offices, financial institutions, asset managers, and corporates shows.

Its international study with more than 130 family office investment managers responsible for around $62.425 billion assets under management found almost all agree that the sector is increasingly investing in alternatives and the switch is a long-term trend. Around 42% strongly agree with the view.

A third of family office investment managers say their funds will increase allocations to real estate by 50% while 33% will make the same increase in allocations to private debt

The alternative asset classes seeing the most benefit from the switch in allocations are likely to be real estate and private debt – the study found a third (34%) say their funds will increase allocations to real estate by 50% or more while 33% will make the same increase in allocations to private debt.

Family office investment managers said the strong performance of alternatives is the key reason for the switch followed by the diversification benefits and increasing transparency in the asset class. Increased choice in the sector was the fourth most popular reason for investing ahead of inflation protection and the ability to provide regular income.

The research from Ocorian, which works with more than 60 family offices around the world, found funds are the most popular vehicles for investing in alternative assets. Around 77% questioned said they are seeing growth in funds ahead of 56% who say they’ve seen growth in SPVs and GPLPs. 

Amy Collins, Head of Family Office at Ocorian, said: “As family offices look to diversify their portfolios and generate higher returns, there is a growing interest in alternative asset classes such as private equity, real estate, and hedge funds. Whilst these asset classes offer the potential for higher returns, they also require a higher level of expertise and specialised knowledge.”

Most of the growth in alternatives is coming from funds within the EU and the UK

The research for Ocorian, which provides services to HNW individuals and family offices as well as financial institutions, corporates and asset managers, found the EU is narrowly ahead of the UK as the jurisdiction seeing the most exposure to alternatives. Around 54% highlighted growth in the EU while 53% pointed to the UK. The Middle East was chosen by 38% ahead of Asia and the Americas on 32%. 

The rise in the private capital model is changing the way investments and transactions are completed

Amy continued: “The strong performance of alternative asset classes in the last few years makes the case for investing in the sector and family offices around the world are taking the opportunity as they continue to diversify their investments. 

“Rising interest rates help to ease the urgency of finding alternatives to cash, but an issue is that people can sometimes think there is a binary choice between holding cash or going for a risky asset.

The rise in the private capital model is changing the way investments and transactions are completed – they can use their own family office competitive advantages, which means they enact the transaction and then refinance it if they need to, and they can be much more flexible, with often just one person making the decision at the top.” 

The table below shows family office investment managers' plans for increasing allocations to alternative asset classes over the next two years.

ASSET CLASSHow many will increase allocations by up to 10%How many will increase allocations by between 10% and 25%How many will increase allocations by between 25% and 50%How many will increase allocations by 50% or moreHow many say allocations will stay the sameHow many say allocations will decrease
Real estate21%16%22%34%3%4%
Private debt13%20%28%33%2%4%
Private equity15%28%26%28%-2%

Ocorian’s approach to the challenges and opportunities family offices face

Ocorian’s award-winning dedicated family office team provides a seamless and holistic approach to the challenges and opportunities families face. Its service is built on long-term personal relationships that are founded on a deep understanding of what matters to family office clients. Its global presence means Ocorian can provide bespoke structures and services for international families no matter where they live.

Our family office team offers tailored, practical solutions that are flexible enough to adapt to changing family circumstances. They can act as an outsourced family office or multi-family office, providing support around issues such as managing investments, running family homes and philanthropy. 

We have dedicated family office teams in key jurisdictions including Jersey, Guernsey, London, Singapore, the UAE and Mauritius. 

Areas we provide support for include:

  • Administration of liquid and illiquid investments and banking relationships
  • Consolidated asset and liability reporting
  • Management of ownership structures
  • Luxury assets
  • Family homes
  • Philanthropy
  • Personal financial management
  • Family governance
  • Private capital 

For more information on Ocorian's family office offering, reach out directly to the team.

*Ocorian commissioned independent research company PureProfile to interview 134 family office investment managers working for family offices which use third-party private client services providers to support in the preservation and protection of their clients’ wealth. The investment managers interviewed are responsible for assets under management of $62.45 billion and include 63 working for multi-family offices. The global study interviewed family offices in the US, UK, Canada, China, Germany, India, Norway, Saudi Arabia, Singapore, South Africa, Sweden Switzerland, UAE, Denmark, France and Japan.

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