Survey: Family-office investing strategy increasingly shaped by succession planning
Family offices have made major shifts in their investment strategies due to economic uncertainty and the need for succession planning, according to a new report by London-based Aeon Investments.
The report, based on interviews with 100 senior investment and wealth managers of family offices in America and Europe, found that family offices have increased their investments in alternative asset classes, with such illiquid assets as private debt, private credit and real estate.
“Family offices need to deliver stable and predictable income, and that is driving increased interest in private debt, with residential real estate and specialist areas of corporate finance proving to be the most popular asset classes to offer yield and capital preservation,” Aeon Investments COO Ben Churchill said in a statement.
Nine out of 10 family-office managers, who have a combined $98.4 billion of assets under management, say investment in private debt and real estate has been a key to family offices’ increasing diversification into illiquid asset classes. Private debt investments, they say, can provide a floating rate coupon that could act as a natural hedge against inflation.
Managers also said a combination of attractive yields and such structural protections as debt covenants and credit enhancements offer “a high degree of safety.”
The study also found that the impacts of COVID-19 have motivated family offices to accelerate succession planning, incorporating younger generations into their investment planning. As a result, younger family members have been increasing interest from family offices in sustainable investing. Private debt can also offer family offices a way to deploy environmental, social and governance (ESG) strategies.
In addition, the Aeon study found that nearly 90% of family-office managers expect increased customization of alternative credit solutions over the next three years due to the demand for more personalized return profiles.