An inside look at family offices’ investing strategies

Episode Summary

Executive Summary: Goldman Sachs’ family office survey shows ultra-wealthy families remain steady, strategic allocators with a barbell portfolio: heavy alternatives exposure, meaningful cash, and selective risk-taking. They’re increasingly deploying liquidity into public equities, private equity, private credit, real estate, venture, and AI-related themes while staying cautious on leverage and focused on preserving capital across macro uncertainty.

Main Topics: Barbell portfolio construction (Priority: 5/5): Family offices balance high allocations to alternatives with sizable cash and fixed income to preserve flexibility, meet capital calls, and exploit dislocations without forced selling. Current macro concerns and resilience (Priority: 5/5): Recession, geopolitics, and inflation are top worries, but family offices have prepared by raising cash and fixed income and by maintaining long-duration capital discipline. Deployment into public and private markets (Priority: 4/5): A meaningful share plan to reduce cash and increase exposure to equities, private equity, and private credit, reflecting confidence in opportunity sets and higher carry/return potential. Geographic positioning and U.S. bias (Priority: 4/5): Family offices remain overweight U.S. assets, with home bias by region, and show a preference for developed markets over emerging markets. Venture capital, AI, and innovation themes (Priority: 4/5): VC is already a core allocation, and family offices are leaning into AI, cybersecurity, life sciences, and sustainability, often using their long horizon and operating expertise. Real estate and real estate credit (Priority: 4/5): Real estate remains a major family office asset class and inflation hedge, with current dislocation creating opportunities first in real estate credit and later in equity acquisitions. Operating businesses and M&A (Priority: 3/5): Family offices are tightly linked to family-owned operating businesses, often supporting or selling stakes strategically, with valuation the main trigger and corporate buyers the preferred counterparties.

Key Arguments: Family offices have changed less than many investors despite macro volatility; their multigenerational capital leads to steady, strategic allocation behavior. Their portfolio structure is distinctly barbelled: high alternatives exposure requires large cash buffers to preserve liquidity and optionality. Family offices are important to capital markets because they are numerous, wealth-rich, patient, and able to provide capital during dislocations when others are constrained. Lower leverage is a deliberate risk-management choice; avoiding forced selling is central to preventing permanent capital loss. Private credit is gaining appeal because of floating-rate exposure, perceived double-digit returns, and the gap left by regional bank retrenchment. Public equities and private equity remain core destinations for redeployed cash, while real assets and credit offer additional opportunity. Geopolitical risk is driving asset-location decisions, not just asset-class selection, especially for Asia-based families concerned about China-U.S. relations. Family offices are already deeply embedded in venture capital and are increasingly active around AI and other secular-growth themes. Family-owned operating businesses remain central to many family offices, shaping both their investment philosophy and their role in M&A. Crypto has matured from a growing interest to a more polarized market: committed investors stayed in, while many others shifted attention to digital assets/blockchain rather than crypto itself.

Data Points: Survey sample size: 160+ family offices - Second Goldman Sachs family office survey conducted globally Large-AUM share: More than 70% have over $1 billion in assets - Survey respondent profile Estimated global family offices: At least 10,000 - Broader market estimate given by the speakers Estimated family office AUM: Close to $10 trillion - Global scale of family office capital Alternatives allocation: 44% - Average allocation in the survey Public equities allocation: 28% - Average allocation in the survey Cash and fixed income allocation: 22% - Average allocation in the survey Cash and cash equivalents: 12% - Specific cash allocation cited by Sarah Families not using leverage: 42% - Shows low-leverage behavior among respondents Families planning to reduce cash: 35% - Share expecting to lower cash allocation in the next 12 months Plan to increase public equities: 48% - Expected deployment of cash over the next 12 months Plan to increase private equity: 41% - Expected deployment of cash over the next 12 months Plan to increase private credit: 30% - Expected deployment of cash over the next 12 months Current private credit allocation: 3% - Low current starting point cited by Tony Family offices invested in VC: 85% - Global share invested in venture capital Average VC allocation: 7% - Share of overall portfolio allocated to VC Family offices supporting operating businesses: More than three quarters - Survey finding on link to family-owned operating businesses Decision makers involved with operating businesses: Almost half - Respondents describing their role as actively involved Families citing operating business investing as central: One-third - Philosophical importance of family business investing Families planning to hold businesses in perpetuity: One-third - Long-term ownership intent Primary sale trigger for family stakes: Valuation - Most common reason to sell part of a family-owned operating business Cash allocation held in treasuries example: Almost 5.5% yield on a six-month Treasury - Current short-duration cash management discussion AUM in U.S. assets: Nearly two-thirds - Geographic allocation of family office assets AUM in non-U.S. developed markets: 21% - Geographic allocation of family office assets AUM in emerging markets: 17% - Geographic allocation of family office assets Family offices overweight technology: 43% - Sector positioning Family offices overweight healthcare: 34% - Sector positioning Crypto invested in 2021: 16% - Prior survey comparison Crypto invested in 2023: 26% - Current survey result Interested in crypto for the future in 2021: Almost 50% - Prior survey comparison Interested in crypto for the future in 2023: 12% - Current survey result Families with direct real estate exposure: 60%+ - Families owning real estate directly Real estate credit coming due: Over $1 trillion - Opportunity set discussed for family offices

Pivotal Quotes: "We see a much more barbelled approach to investing." — Sarah Nason-Tarajano: Explaining why family offices hold both large alternative allocations and substantial liquidity "If you hold 45% of your assets in alternatives, you're going to need to have another part of the portfolio that provides liquidity... to be able to act on market dislocations without being a forced seller of your other assets." — Sarah Nason-Tarajano: Rationale for higher cash balances and disciplined liquidity management "The reason why we do this survey... is because there isn't a lot of collective information." — Mina Flynn: Why Goldman Sachs surveys family offices and what the data is meant to reveal

Implications: Family offices are likely to keep shaping capital markets through patient, flexible capital. Expect continued flows into equities, private assets, real estate credit, VC, and AI-related opportunities, with cash staying important as a strategic option rather than idle capital.