Family offices flock to private markets with allocations surging over 500% in nearly a decade

Family offices have significantly escalated their allocations to private markets, with the number of such entities investing privately surging 524% since 2016 to 4,067, and collectively managing an estimated $3.1 trillion in 2024. This trend is largely attributed to their long-term investment horizons and higher tolerance for illiquidity, seeking more stable growth compared to public market volatility, particularly in direct lending, private credit, and infrastructure. While a recent UBS survey indicates a short-term preference for increasing private debt and trimming private equity exposure in 2025, family offices generally plan to boost their private equity and other private asset allocations over a five-year horizon, highlighting their growing and evolving influence within alternative investment landscapes.

Analysis

A significant secular shift is underway as family offices dramatically increase their exposure to private markets, with the number of firms allocating to this space surging by 524% since 2016 to 4,067. This growth has outpaced that of other institutional investors and is fueled by a substantial increase in manageable wealth, with family offices overseeing an estimated $3.1 trillion in 2024, up 63% from 2019. The primary drivers for this allocation are the long-term investment horizons characteristic of family offices and their lower liquidity needs, which make them well-suited for illiquid assets. They are seeking a more stable growth environment compared to the volatility of public markets, with a particular focus on direct lending, private credit, and infrastructure. A BlackRock survey indicates nearly a third of single-family offices plan to boost investments in these areas through 2026. However, the allocation strategy is becoming more nuanced; a recent UBS survey reveals a planned tactical reduction in private equity exposure for 2025 in favor of developed market equities. Despite this short-term selectivity, the long-term strategic commitment remains strong, as most family offices intend to increase their private equity allocations over a five-year horizon.

Key Decisions for Investors

• Investors should consider increasing exposure to asset managers and funds specializing in private credit and infrastructure, as these sectors are poised to receive significant capital inflows from family offices in the near term.
• Monitor private equity fund flows and valuations closely, as the anticipated short-term reduction in family office demand for PE in 2025 could create tactical opportunities or signal near-term fundraising challenges for general partners.
• Given the structural shift of capital from a sophisticated investor base, evaluate the long-term impact on public market liquidity and valuations, particularly in sectors that family offices may be de-emphasizing.
• Firms like BlackRock, which provide institutional-grade access to private markets, are well-positioned to benefit from this long-term trend, making them potential long-term beneficiaries of this capital migration.