Family offices share high conviction in private equity

Northern Trust discovered in a survey of family offices overseeing more than $200 billion in assets that a majority saw the most opportunity in private equity allocations. Private equity was preferred over real estate and hedge funds, according to Northern Trust’s Global Family Office’s 2020 Benchmarking Report. Northern Trust’s Global Family Office group was set up in 1982 and serves more than 450 families in more than 30 countries. The average client size is roughly $900 million. In the group’s latest survey, nearly all (98%) participants have an allocation to alternative investments with an average allocation making up 37% of the investment portfolio. The breakout of the average alternative investment portfolio is: 14% private equity funds, 9% hedge funds, 6% direct real estate investment, 5% direct private equity investment and 3% in real estate funds. The responses were collected over the summer months and data suggest an ongoing interest in alternative investments with private equity, private credit and venture capital leading the way. Northern Trust officials point out that the interests are shaped by questions of geopolitical confrontation, domestic political uncertainty, climate change and current asset prices. Roughly 78%, said their top concern prior to the Presidential Election was U.S. political uncertainty. If the political instability over a good part of 2020, wasn’t enough of a concern this elite group of investors are also still very focused on the obvious challenges of alternative investments – namely liquidity and due diligence. According to Northern Trust, more investors interestingly too are understanding that funds of funds are not as untenable as they once were. This is due to the realization of the market saturation at the top of the heap and the need to find alpha in other size and sector verticals.

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