The private credit sector has seen explosive growth, reaching $1.7 trillion, yet family offices are showing less enthusiasm for it this year. Data from Preqin reveals a decline in family office interest in private credit, as these ultra-wealthy investors shift toward other assets, such as real estate and private equity, especially in North America and Europe.
Grace Cheung of TGIM Assets Capital states that many family offices prefer direct private debt transactions, leveraging their resources and networks rather than using traditional credit funds.
Challenges for private credit managers are exacerbated by high borrowing costs and potential rate cuts by central banks, which may affect future returns. Consequently, family offices seem to favor private equity’s higher potential returns and long-term benefits, with nearly 40% of global family offices planning to increase private equity investments, according to UBS.
While some investors in regions with high-interest rates, like Latin America, prefer private equity over credit, others still back private credit, with Citi’s survey showing a significant tilt toward bullishness in various regions. Cheung adds that family offices are increasingly focused on flexible, controlled investments over generic private credit funds.
