[SINGAPORE] Family offices are raising their portfolio allocations for non-US developed market equities as tariff tensions and concerns about a US economic slowdown are prompting many to diversify, a BlackRock survey has found.
This comes as US shares have had a volatile year marked by the Trump administration’s on-and-off tariff shifts, with the S&P 500 underperforming indices in Europe and Asia. In the year to date, the S&P 500 has inched up only 2.6 per cent compared to other global markets: Europe’s Stoxx 600 rose 8.3 per cent, Hong Kong’s Hang Seng Index jumped 19.9 per cent, and South Korea’s Kospi has soared about 22 per cent.
With an upheaval in global markets set off by “Liberation Day” tariffs and the possibility of the US economy slowing down, family offices are rethinking their investment portfolios, which tend to have significant exposure to US equities, bonds, and the greenback.
Up to 64 per cent of family offices are looking to increase portfolio diversification and 84 per cent see the challenging geopolitical landscape as an increasingly critical factor that weighs on their investment decisions, leading to a reassessment of how they generate returns and manage risks.
With the drive towards diversification, 59 per cent seek to raise their allocations to non-US developed market equities, said the report, which surveyed 175 single-family offices that collectively oversee assets worth more than US$300 billion.
Many family offices are also looking to private markets for diversification and higher returns, the report added.
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Alternative assets, which make up 42 per cent of family office portfolios, appear set to remain a portfolio cornerstone, despite rising concerns about fees.
Private credit is gaining traction, with 51 per cent of family offices surveyed optimistic about its prospects given its attractive total return, yield and liquidity profile.
The appetite for infrastructure investments is also growing, with 75 per cent of survey respondents positive on the asset class’ prospects.
Liquid and illiquid alternatives, cash, and crypto, are also set to be beneficiaries from family offices’ push for diversification and downside mitigation.
Private credit becomes core allocation
Sentiment on private credit is bullish as close to a third or 32 per cent of family offices plan to raise allocations to the asset class between 2025 to 2026 – the highest figures among alternative asset classes covered by the survey.
It is becoming a core allocation in portfolio of many family offices and occupies 15 to 30 per cent of total assets under management for the portfolios of some respondents, the report said.
“The asset class has attracted fresh capital and allocations previously earmarked for public debt, private equity, and venture capital,” it said.
When it comes to selecting particular strategies within private credit, respondents prefer special situations and direct lending – as both categories are viewed as offering equity-like returns with superior structural protection.
While some see opportunities in potential volatility others are worried about crowding in the private credit space or the performance of the asset class in a recession during a credit downcycle.
Infrastructure: resilient, hedge against inflation
Favoured for its perceived resilience and inflation mitigation abilities, “infrastructure’s role as a portfolio diversifier that can provide inflation-linked yield is a compelling combination for family offices”, the report said.
Infrastructure’s ability to generate stable cash flows and its alignment with long-term secular growth themes, such as the energy transition and digital connectivity, make it appealing
Sentiment on infrastructure is bullish as three in ten family offices plan to raise allocations to infrastructure investments between 2025 and 2026.
This makes the asset class the second most popular of all alternative assets surveyed, a runner-up to private credit.
