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

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


Vithun Khamsong | Moment | Getty Images

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

Investment firms of the ultra-rich are increasingly investing in alternative assets like real estate and venture capital, according to a new survey by BlackRock. Family offices averaged a 42% portfolio allocation to alternatives in recent months, up 3 percentage points from last year, and are making substantial changes to how they invest that capital.

Nearly one-third (32%) of single-family offices planned to increase their allocations to private credit this year, according to the survey. The second most-popular asset class was infrastructure, with 30% of respondents reporting they intend to invest more in the sector through either debt or equity. The survey polled 175 family offices overseeing more than $320 billion combined between March 17 and May 19.

Private equity still has positive momentum, though 12% of respondents said they plan to decrease their allocations to funds or direct investments. When asked about the asset class’ prospects this year, 30% reported feeling optimistic while 22% said their attitude was pessimistic.

BlackRock’s Armando Senra told CNBC that family offices overall are still investing more capital in private equity. They are, however, spreading their bets when it comes to private markets, hence the growing market share of private credit and infrastructure.

“Private equity continues to be a centerpiece of the portfolio,” said Senra, who leads the asset manager’s institutional business in the Americas. “I think that what you see is more of a desire to diversify for a number of reasons.”

Liquidity is a key factor, he said, as the slowdown in exits means private equity investors have to wait longer for returns.

Senra also cited the low-risk appeal of infrastructure investing, which he said can provide a “private-equity-type return with significantly lower risk.” Three-quarters of respondents to the BlackRock survey reported feeling bullish or optimistic about infrastructure, with only 5% expressing pessimism.

The sector is also a way for family offices to invest in the artificial intelligence boom.

“AI has big infrastructure needs,” Senra said, noting increased demand for data centers and improved energy grids.

In May, Jeff Bezos’ family office backed a $155 million seed round for Atlas Data Storage, a firm that uses a DNA-style system to store data more efficiently and at a lower cost.

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As for private credit, some family offices are wary of the hype. While 51% of respondents said they were optimistic or bullish on private credit, 21% reported pessimistic or bearish attitudes. The rush of capital into private credit has raised concerns about the quality of the borrowing companies and how many would default on loans in the event of a recession.

Senra said caution is natural when an asset class surges in popularity.

“I think that whenever you have enough class that captures a lot of attention, you really need to separate those managers that have experience across different market environments,” he said.

That said, 62% of respondents favored special situation debt, which is typically extended to companies that are restructuring or are facing stress. The second most-preferred private debt category was direct lending. Done right, according to the report, private credit can offer more investor protection than private equity.



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