With US$320B at stake, how are these family offices pivoting in challenging times?

Risk management is a clear focus for family offices as geopolitics and changing demand of wealthy clients create a new investment reality.

A survey of 175 single-family offices managing a collective $300 billion in assets has been released by BlackRock today (June 17) revealing that 84% are most concerned about the current geopolitical tension and this is a priority consideration in making capital allocation decisions. The poll was conducted before the additional Israel-Iran conflict escalated.

At the start of 2025, sentiment among family offices was cautious, but the survey shows that it weakened following the tariffs that upended global trade in April and has continued to cause uncertainty and market volatility. This is reflected in bearishness for the global outlook rising five percentage points to 62% and concerns about a US economic slowdown rising four points to 43%.

There was also a slump in confidence in achieving target returns for 2025-26, from 64% before ‘Liberation Day’ to 51% afterwards.

Seven in ten family offices that took part in the survey had or were planning to make changes to their portfolio allocations before the tariffs were announced, but most have pivoted to avoid any significant changes while focusing on tactical moves to reduce risk and seize opportunity.

“Family offices are now prioritizing diversification, liquidity, and structural reassessment of risk as they build resilience in their investment portfolios,” said Armando Senra, head of the Americas, Institutional Business for BlackRock.

More than two thirds of respondents are aiming to enhance diversification, and nearly half are broadening their return sources through increased allocations to illiquid alternatives, non-US equities, liquid alternatives, and cash.

Alternatives are in important part of the mix, comprising up to 42% of portfolio allocations, up from 39% in 2022-23. Private credit (particularly special situations/opportunistic and direct lending) is most favored (by around one third of respondents).

“Private credit is gaining traction as investors increasingly value consistent cashflow, structural protections, and run-off structures while, in certain strategies, maintaining the potential to capture equity-like returns,” said Sarah Butcher, head of Institutional and Capital Formation for BlackRock in Canada.

The most significant challenge in private markets is high fees, cited by 72% of respondents, a notable increase from 40% in the 2022-23 survey.

Close behind private credit is infrastructure which is favored by 30% and seen as having a positive outlook by around three quarters of respondents.

“Family offices continue to seek opportunities to add resilience and stability to portfolios,” added Butcher.  “The observed extension of real asset allocations into global infrastructure builds on, and diversifies, many families’ traditional tilt to real estate. Supported by the strong tailwinds driving global private infrastructure fundamentals, investors are recognizing the differentiated and diversifying return opportunity presented by the asset class.”

To ensure that they have the right knowledge to manage these asset classes, many family offices are partnering with external experts. More than half of respondents said they have gaps in internal expertise around private markets topics and 22% have used outsourced chief investment officers to bolster their expertise.

Finally, AI gets a mention in the report. Less so for single-family offices adopting the technology for their own use to improve the investing process (33% are), but by investing in companies that are building AI solutions (45%) or stand to benefit from AI’s growth (51%).