Family offices have 46% of their total portfolio in alternative investments, according to the JPMorgan Private Bank Global Family Office Report.Unlike stocks, which can swing wildly, alternatives such as private equity and private companies have more gradual valuation changes, smoothing out volatility.
The study surveyed 190 single family offices around the world, with an average of $1.4 billion in assets.Large family offices in the U.S. are even more concentrated in alternatives, the study found. American family offices with upward of $500 million in assets had more than 49% invested in alternatives, with 22% in public stocks, according to the survey.
William Sinclair, head of the U.S. Family Office Practice at JPMorgan Private Bank, said that while stocks and bonds remain important for family offices, they are increasingly moving to alternatives for higher returns. The report also said many family office founders started as entrepreneurs themselves and sold a business. Those founders now want to use their family offices to take ownership stakes in other private companies and apply their experience to helping the companies grow.
Surprisingly, less than half of family offices have an overall investment return target, according to the survey. In the U.S., only 49% of family offices have a long-term target return for their portfolio. Among those who do have a target return, the median return target was 8%.