Family offices shift focus to private credit

The world’s wealthiest families are piling into private credit — and fast, according to BlackRock’s latest global survey of family offices (pdf). Around 32% of the 175 surveyed say they plan to boost their allocations to the asset class this financial year, more than any other alternative investment.

Big names and numbers: Alternatives now account for 42% of family office portfolios, up from 39% in 2022-2023. In some cases, private credit alone makes up 15-30% of assets under management. UK b’naires David and Simon Reuben, and Paul Allen’s former family office have already jumped on the private credit bandwagon, Bloomberg reports. BlackRock is also putting real skin in the game, dropping USD 12.5 bn to acquire Global Infrastructure Partners and finalizing a USD 12 bn agreement to acquire private credit heavyweight HPS Investment Partners.

Infrastructure is part of the diversification drive: Over two thirds of family offices are moving to diversify their holdings, and 30% of respondents plan to increase allocations to infrastructure, drawn by the perceived resilience, stable cashflow, and inflation-linked income, tied to areas like decarbonization and AI-fueled data centers.

What’s driving the shift? Traditional 60/40 portfolios are faltering, and PE returns have disappointed. Family offices are gravitating toward asset classes that offer cashflow, downside protection, and attractive returns, rather than illiquid investments with long exit timelines. More than half of respondents are bullish on private credit’s prospects, lured by the promise of higher yields, improved liquidity compared to private equity, and protection from public market swings. Global uncertainty and trade tariffs are also making family offices take a second look at their investment portfolios.

There are still barriers to entry: Some 72% of family offices cited high fees as the biggest challenge of investing in private markets, up from 40% in the last report.

And a lack of transparency: More than half flagged gaps in their internal expertise, especially in private-market analytics, dealsourcing, and reporting. Some are turning to outsourced chief investment officers or deep partnerships to get access to talent, tech, and hard-to-reach agreements. While 45% of family offices are investing in AI-linked options, only a third are using AI internally to improve investment processes due to concerns ranging from poor interpretability and data security to a lack of in-house expertise.

Still holding PE, but warily: While PE remains a major holding for many, some 70% of family offices have an either neutral or bearish approach, citing lackluster exits and delayed capital returns. In response, investors are favoring secondaries, co-investments, and bespoke structures like funds-of-one, and becoming increasingly selective when choosing managers amid high fees.

MARKETS THIS MORNING-

Asian markets are somewhat mixed this morning, as investor sentiment took a hit once again after a rebound across equity markets earlier this week. Japan’s Nikkei, South Korea’s Kospi, and China’s CSI 300 are all up, but Hong Kong’s Hang Seng lost 0.9%

Wall Street futures also point to a less than cheery sentiment as investors await the US Federal Reserve’s interest rate decision today, and amid concerns that the US could join in on Israel’s attacks on Iran.

THE CLOSING BELL: TADAWUL-

The TASI fell 1.4% yesterday on turnover of SAR 5.0 bn. The index is down 11.0% YTD.

In the green: SRMG (+6.9%), Sabic Agri-Nutrients (+4.8%) and Zamil Indust (+4.7%).

In the red: MBC Group (-6.6%), ACWA Power (-6.0%) and Raoom (-5.1%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.8% yesterday on turnover of SAR 45.2 mn. The index is down 15.9% YTD.

In the green: Alshehili Metal (+7.8%), Alnaqool (+7.4%) and Anmat (+5.2%).

In the red: Jana (-16.6%), Time (-14.4%) and IOUD (-11.4%).

CORPORATE ACTIONS-

Chubb Arabia Cooperative Ins. secured approval from the Ins. Authority to raise its capital by SAR 100 mn to SAR 400 mn, according to a disclosure to Tadawul on Monday. The increase will take place by issuing 1 bonus share for each existing 3 shares and will be funded from the company’s retained earnings (SAR 52 mn) and reserves (SAR 48 mn).

Aljazira Takaful’s general assembly approved a SAR 19.8 mn dividend distribution for FY 2024 at SAR 0.30 per share, with payouts set to begin on 6 July, according to a disclosure to Tadawul.