Family Offices Shift Investment Strategy Toward Stocks

A Goldman Sachs survey has highlighted a noticeable shift in investment strategies among the world's wealthiest families. They are increasingly favoring public equities over private equity stakes.

These family-run investment bodies have boosted their average holdings in stocks to 31%, marking an increase of 3 percentage points since Goldman Sachs's previous survey in 2023. Over the same span, their allocation to private equity has decreased significantly, down from 26% to 21%.

This trend of gravitating towards stock investments is even more pronounced among family offices in the United States and across the Americas. Here, the allocation surged from 27% to 31%, while their commitment to private equity dipped from 27% to 25%. In a comprehensive survey conducted by the bank from late May to mid-June, 245 global family offices participated, with two-thirds managing more than $1 billion in assets.

Tony Pasquariello, who heads the global hedge fund coverage at Goldman Sachs, referred to this pattern as a preference for 'risk-pro assets' since these family offices maintain a substantial stake in private equity ventures.

Despite concerns over global political tensions and inflation, more than 75% of participants anticipate tariffs to remain steady or escalate, with asset valuations expected to either stabilize or contract.

Family offices in the U.S. in particular, could face considerable tax implications from large-scale asset sales, according to Sara Naison-Tarajano, the leader of Goldman Sachs's Apex family office business. These entities tend to capitalize on market opportunities when larger players withdraw, as seen during volatile periods triggered by tariff discussions.

Naison-Tarajano, who also serves as the global head of capital markets within private wealth management, stated: "Market apprehensions are fueled by geopolitical and trade tensions, prompting family offices to be ready to invest during market dislocations."

Public equities and ETFs are seen as the top avenues for entering the artificial intelligence sector, with 86% of family offices declaring an investment in AI components. Many are also investing in infrastructure like data centers or AI-themed venture capital funds.

Meena Flynn from Goldman Sachs remarked that while family offices are doubling down on public equities, they continue to identify opportunities within private equity. Approximately 72% are investing in secondary markets, a notable rise from 60% two years earlier, aided by the liquidity challenges forcing endowments and foundations to sell off assets at discounts.

Flynn noted: "Family offices can afford to hold onto diverse assets for generations, freeing them from immediate exit concerns." Despite some drawdowns, 39% of family offices plan to increase their involvement in private equity over the next year, with a comparable 38% eyeing more stock investments.

Few family offices foresee drastic changes to their portfolios in the near future, but across asset categories, there's a tendency to augment rather than reduce allocations. About 33% are looking to inject more capital, while only 16% plan to enhance cash reserves.

Naison-Tarajano emphasized the strategic importance of maintaining investments: "This future-oriented outlook shows family offices' recognition of the necessity to stay engaged, heavily valuing private equity's timing and cycles."

Investment Sentiments across Regions

Family offices in the Americas appear more positive compared to their global counterparts; over a third have not adjusted for tail risks. In contrast, risk diversification remains a priority for 14% in EMEA and 12% in APAC, primarily through geographic diversification and gold investments—though gold holds a smaller portion of around 1% on average.

"In politically unstable regions, our clients prefer physical gold holdings, monitoring them closely," Flynn added, observing gold allocations that can reach 15% in certain portfolios.

In Asia, cryptocurrency also serves as a hedge. Only 26% of APAC family offices are uninterested in crypto, compared to 47% in the Americas and 58% in EMEA.

Currently, one-third of family offices have ventured into cryptocurrency, a notable increase from 26% two years ago. For those yet to invest, Asian family offices showed a strong inclination, with 39% considering it, a stark contrast to 17% elsewhere, largely due to geopolitical concerns, according to Flynn.