The types of assets family offices invest in haven’t changed significantly, but their investment strategies have, according to BNY Mellon Wealth. Notably, cryptocurrencies are gaining traction as younger generations take over.
Real estate and public and private equity continue to dominate family office portfolios. However, family offices are increasingly opting for direct investments in unlisted spaces rather than relying on external managers. A survey by BNY Mellon Wealth of 189 global family offices reveals that most have completed at least six direct deals in the past year. They anticipate doing even more in the coming year, attracted by the illiquidity premium and the opportunity to influence the underlying business by taking management or board roles.
The report highlights that family offices identify their strengths, such as operational expertise and unique access to opportunities through connections. They have a clear strategy for adding value, realizing gains, and exiting investments. The complexity of setting up a direct investing program varies, and while two-thirds conduct their own due diligence, nearly half seek input from investment consultants. Time constraints are a significant challenge, particularly for those with fewer direct investments.
True to their entrepreneurial spirit, family offices are exploring new opportunities. Private equity allocations now prominently include venture capital investments. Cryptocurrencies, now making up 5% of portfolios, were nearly unthinkable a decade ago. Diverse motivations drive cryptocurrency investments, with over half of family offices aiming to stay current with new investment trends and opportunities. Interest from current and next-generation leadership also plays a role.
However, 38% of surveyed family offices avoid cryptocurrencies due to concerns about volatility, cybercrime, and regulatory uncertainties.
Public equity remains a popular choice, with half of the surveyed family offices planning to increase their exposure in the next year. Additionally, 22% intend to reduce their cash allocations. The strong performance of public markets, driven by technology stocks and AI advancements, and the resilience of the U.S. consumer, make public equity investments appealing. Uncertainty around interest rate cuts adds to the attractiveness of liquid public market investments.
