[NEW YORK] Family offices want more of the private credit boom.
More than half of 175 family offices around the world are optimistic about private credit and almost one-third said they intend to increase allocations to the asset this year, the most of any type of alternative investment, according to a survey released on Tuesday (Jun 17) by BlackRock. The super-wealthy also are increasingly bullish about infrastructure investing, with 30 per cent saying they plan to commit more of their money to the market.
While private equity (PE) remains a core investment for family offices, the last few years of lacklustre performance, difficulty exiting investments and delayed or reduced returns of capital are taking a toll on investors, the survey found. That’s led the wealthy to become much pickier about selecting managers and deciding whether they are worth the fees.
“They are diversifying their exposure within private markets,” Armando Senra, head of the Americas institutional business at BlackRock, said. “While allocations used to be primarily into private equity growth, now what you see is high interest in private credit, the beginning of interest in infrastructure.”
The rich are increasingly attracted to private credit’s potential to diversify portfolios and its possibility of higher yield than in public bond markets, according to Lili Forouraghi, BlackRock’s head of family offices, health care, endowments, foundations and official institutions in the US.
Infrastructure investments related to decarbonisation and “the whole buzz of artificial intelligence plus data centres, those are the areas that have intrigued a lot of our clients”, Forouraghi said.
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‘Mixed’ sentiment
The survey showed alternative investments comprised 42 per cent of assets in family office portfolios, on average, up from 39 per cent in a similar survey in 2022 to 2023.
Private credit holdings can make up 15 to 30 per cent of some family offices’ portfolios. Many remain committed to private equity, which can account for half or more of some portfolios, but the survey found a “mixed” sentiment with 70 per cent neutral to bearish on the asset and only 30 per cent more bullish.
Investors are gravitating towards secondaries, direct and co-investments in private equity, according to the survey.
Members of the world’s ultra-wealthy betting on private credit include Andre Koo Jr, an heir to one of Asia’s biggest finance fortunes, and UK real estate billionaires David and Simon Reuben.
An investment firm serving super-rich families that was once part of Microsoft co-founder Paul Allen’s personal investment firm has also boosted its interest in the asset, which has minted its own class of billionaires in recent years as it became one of Wall Street’s hottest trends.
BlackRock, the world’s largest asset manager, oversaw US$11.6 trillion in assets at the end of March and committed almost US$28 billion in three acquisitions to compete with the leaders of the alternative asset industry, including Blackstone and Apollo Global Management.
BlackRock spent US$12.5 billion to acquire Global Infrastructure Partners and is in the process of closing a US$12 billion deal for private credit firm HPS Investment Partners. BLOOMBERG
