Family offices double down on private credit and infrastructure during private equity slump, survey finds

BlackRock's latest survey reveals family offices are significantly increasing allocations to alternative assets, now averaging 42% of portfolios. This strategic shift, up 3 percentage points from last year, is primarily driven by a desire for diversification and improved liquidity. Key areas of increased investment intent include private credit (32% of respondents) and infrastructure (30%), with the latter seen as attractive for its lower risk profile and exposure to AI-driven growth. While private equity remains central, family offices are spreading capital, cautiously navigating private credit's mixed sentiment by favoring special situation debt, reflecting a broader search for stable returns and diversified exposure.

Analysis

A BlackRock survey of 175 family offices reveals a significant strategic shift in high-net-worth portfolio construction, with average allocations to alternative assets rising by 3 percentage points to 42%. This reallocation is not uniform but reflects a nuanced view on risk, liquidity, and thematic opportunities. While private equity remains a portfolio "centerpiece," its dominance is being tempered by concerns over slowing exits and the resulting impact on liquidity, leading 12% of respondents to plan allocation decreases. Consequently, capital is flowing into private credit and infrastructure, with 32% and 30% of family offices, respectively, planning to increase their exposure. Infrastructure is viewed with particularly strong optimism (75% bullish), valued for its potential to deliver "private-equity-type returns with significantly lower risk" and as a direct play on the AI boom's demand for data centers and energy grids. Private credit attracts more divided sentiment (51% bullish vs. 21% bearish) due to concerns about borrower quality in a crowded market, yet investors are showing a clear preference for specialized strategies like special situation debt, which 62% of respondents favored. This trend indicates a sophisticated diversification strategy among the ultra-rich, moving beyond traditional private market assets to balance portfolios with different risk profiles and capture specific secular trends.

Key Decisions for Investors

• Given the strong bullish sentiment (75%) and linkage to the secular AI trend, investors should evaluate increasing exposure to infrastructure, particularly funds focused on digital assets like data centers and energy grid modernization.
• The mixed sentiment in private credit warrants a selective approach; prioritize managers with proven track records across different market cycles and consider focusing on niche strategies like special situation debt, where sophisticated investors see distinct opportunities.
• As family offices diversify due to private equity liquidity concerns, investors should review their own private market allocations, potentially rebalancing towards assets with different liquidity profiles or exploring secondary markets to manage duration risk.
• The overarching trend highlights a strategic pivot towards diversification within alternatives; asset managers should consider launching or highlighting products in infrastructure and specialized credit to meet this growing demand from institutional-level clients.