Family offices are contending with an election year, and must adapt to a fast-changing investment landscape and embracing new strategies to preserve and grow wealth across generations. This comprehensive guide explores the key trends and strategies shaping family office investments in 2025, drawing insights from industry experts and recent market developments.


I. The Shift Towards Alternative Asset Classes


Family offices are increasingly diversifying their portfolios with alternative investments to enhance returns and manage risk. This trend is driven by the need for portfolio diversification, potential for higher returns, and access to unique opportunities.


A. Growing Allocation to Alternatives

• 72% of family offices currently invest in private equity

• 54% utilize hedge fund strategies

• 23% engage in direct lending and credit fund investments

These figures demonstrate the significant role alternative investments play in family office portfolios. The high percentage of family offices investing in private equity (72%) indicates a strong preference for this asset class.


B. Reasons for the Shift

• Portfolio diversification: Family offices are using alternative investments to spread risk across different asset classes and reduce overall portfolio volatility.

• Potential for higher returns: Alternative investments often offer the possibility of higher returns compared to traditional asset classes, especially in low-yield environments.

• Access to unique opportunities: Alternatives provide family offices with exposure to niche markets and strategies that may not be available through traditional investments.


C. Navigating Illiquidity

• Family offices' multi-generational time horizons allow them to capitalize on illiquidity premiums. This long-term perspective enables them to invest in less liquid assets that may offer higher returns over time.

• Experts forecast that alternative allocations could reach over 50% for leading families by 2025. This projection underscores the growing importance of alternative investments in family office portfolios.

• The CBOE Volatility Index (VIX) hit an average of 25.8 in 2022, well above its long-term mean of around 19, signaling higher market stress. This increased volatility may be driving family offices towards alternative investments as a way to manage risk.

• 78% of family offices adjusted their portfolios in 2022 in response to market volatility, according to research by Campden Wealth. This indicates that family offices are actively managing their portfolios and seeking new strategies to navigate challenging market conditions.

• While there is a clear trend towards increasing allocations towards private equity and alternatives, the exact percentage increase for private equity specifically in family offices over the next 12 months in 2025 isn't uniformly agreed upon across all sources. However, multiple sources and expert inputs infer that a significant portion, possibly around 50% or more of family offices, might be planning to increase their private equity allocations combining both general sentiment and specific data points.

• Family offices are focusing on high-quality and value opportunities in private markets, rather than purely chasing growth. This approach aligns with the need for downside protection and risk management in uncertain market conditions.

VI. Global Market Trends and Geopolitical Considerations

The world is adjusting to new geopolitical realities as political, economic, and demographic shifts are moving quickly. Family offices are adapting their strategies to navigate an increasingly complex global landscape. The article highlights several key trends affecting family office investment decisions:

A. Geopolitical Considerations

Financial strategies and trends are in flux from countries all around the planet, including BRICS currency evolution as well a potential conflicts and contractual rough patches, tariffs, and sanctions:

• The CBOE Volatility Index (VIX) hit an average of 25.8 in 2022, well above its long-term mean of around 19, signaling higher market stress.

• 78% of family offices adjusted their portfolios in 2022 in response to market volatility, according to research by Campden Wealth.

• Common volatility tactics include increasing cash/liquidity buffers, adjusting asset class exposures, and implementing hedging strategies.

These actions suggest that family offices are indeed diversifying across regions and asset classes to mitigate risks, including those stemming from geopolitical factors.


B. Emerging Markets Opportunities

Family offices are re-evaluating private markets:

• Venture and private equity deal values fell 37% and 12% respectively in 2022 versus 2021 levels, according to PitchBook data.

• Despite this, ~50% of family offices still expect to increase private equity allocations over the next 12 months.

• There is a growing focus on high-quality and value opportunities, rather than purely chasing growth.

This shift in focus could potentially include selective investments in high-growth emerging economies, although the article doesn't explicitly state this.


C. Currency Management

• De-Dollarization Efforts by BRICS: There's a noted push towards reducing reliance on the U.S. dollar among BRICS nations, aiming for financial independence through mechanisms like bilateral trade agreements in local currencies and exploring alternatives to the dollar for transactions. This shift could encourage family offices to diversify their currency exposure.

• Higher rates impact borrowing costs, discount rates for asset valuations, and fixed income opportunities.

• 35% of family offices are overweight in fixed income assets compared to target allocations, according to the Campden report.

• Strategies like increasing cash reserves, adding uncorrelated alternative assets, and options-based hedging saw rising adoption.

V. Direct Investment Strategies

Family offices are taking a more hands-on approach to investments, particularly in private markets. This shift represents a significant change in how family offices manage their wealth and pursue investment opportunities.

A. Growing Trend

• 74% of family offices now have allocations to direct investments

• On average, direct investments account for 26% of a family office's overall portfolio

• This trend is driven by a desire for greater control, customization, and alignment with legacy goals beyond just returns

B. Key Sectors

Family offices are focusing their direct investments on:

• Technology, particularly in areas like AI, blockchain, and digital health

• Real estate and infrastructure

• Sustainable and impact-driven businesses

Note that 59% of family offices have a sector preference approach. Common focus areas include:

• Real estate

• Technology

• Consumer goods

• Healthcare

• Sustainability


C. Benefits and Challenges

Benefits of direct investing for family offices include:

• Greater control and potential for higher returns

• Ability to take a more active role in governance and strategic decisions

• Lower fees compared to fund investment vehicles

• Customized structuring to meet specific investment criteria

Challenges include:

• Requiring larger investment minimums and capital commitments

• Need for dedicated resources to source, conduct due diligence, and oversee investments

• Managing potential conflicts of interest through separate accounts

• Requires specialized expertise and resources

IV. Fintech and Digital Transformation

Family offices are leveraging technology to enhance investment management and operational efficiency. The integration of fintech solutions is becoming increasingly crucial for maintaining a competitive edge in wealth management.


A. Commonly Used Fintech Solutions

1. Portfolio Management Systems:

• Essential tools for tracking investments, analyzing performance, and optimizing asset allocation

• Offer features such as real-time data analysis, risk assessment, and performance reporting

• Popular options include BlackRock Aladdin, eFront, and Morningstar Direct

2. Accounting and Reporting Tools:

• Simplify tasks such as expense tracking, cash flow analysis, and financial reporting

• Include automated reporting features for generating detailed financial statements

• Popular software options include QuickBooks, Xero, and Sage Intacct

3. Customer Relationship Management Software:

• Enhances communication and relationship management with clients

• Helps track interactions, manage communications, and store important client data

• Notable CRM tools include Salesforce, HubSpot, and Wealthbox


B. Emerging Technologies

1. Artificial Intelligence and Machine Learning:

• Enable more accurate data analysis and improve investment decision-making processes

• Analyze vast amounts of financial data rapidly, identifying patterns that might otherwise go unnoticed

• AI-powered robo-advisors provide personalized investment strategies catering to individual family's risk tolerance and financial goals


2. Blockchain and Distributed Ledger Technology:

• Enhances transparency and security in asset management

• Used for tokenization of assets, simplifying investment in previously illiquid assets like real estate or art

• Streamlines transactions and reduces fraud


3. Regulatory Technology (RegTech):

• Helps firms comply with legal requirements efficiently and cost-effectively

• Provides real-time monitoring and reporting, streamlining compliance processes

• Aids in navigating varying international regulations for globally expanding family offices


C. Cybersecurity Considerations

For 2025, Family offices are much more aware importance of security and privacy when selecting fintech solutions:

• Security is a top priority for family offices due to the sensitive nature of their financial information

• Family offices look for platforms that offer multi-factor authentication (MFA) and encryption of data during transmission and storage

• Regular security audits and transparency in security protocols are critical

• The ability to implement customizable access controls helps mitigate risks, ensuring that only authorized personnel access sensitive information

These fintech solutions and emerging technologies are transforming how family offices operate, enabling more efficient and data-driven decision-making processes while prioritizing security and compliance.

VII. Multi-Generational Wealth Planning

Family offices are focusing on long-term wealth preservation and transfer strategies to ensure the continuity of family wealth across generations.


A. Succession Planning

Succession planning trends for 2025 show a dynamic shift influenced by technological advancements, workforce demands, and organizational strategies. Here's how succession planning is expected to evolve:

• Family offices are growing in complexity to manage multi-generational wealth and diverse investment activities.

• Succession planning is increasingly leveraging AI to predict future leadership needs based on data analytics. This involves not just identifying high potentials but also forecasting how future roles might look due to technological changes, thus preparing employees with the right skills earlier in their careers.

• The legal structures and jurisdictions of family offices have significant implications for long-term wealth management.


B. Tax Considerations

Utilizing trusts and other vehicles for efficient wealth transfer:

• Grantor trusts, dynasty trusts, and family-limited partnerships are common tools for wealth transfer.

• These structures can facilitate efficient wealth transfer while minimizing estate taxes.

Navigating complex international tax regulations:

• The location of a family office's establishment and management can dramatically impact its tax obligations.

• Full tax residency subjects global income to taxation in that jurisdiction.

• Territorial systems only tax income sourced or remitted to that country.

• 27% of family offices are domiciled outside their historical home country.

Additional tax considerations include:

• The U.S. estate tax exemption currently stands at $12.92 million per individual in 2023.

• For non-U.S. families, differing residency rules and compliance obligations apply.

• International informational return filings add to compliance complexities when global activities are involved.


C. Education and Preparation

• Working closely with professional advisors well-versed in tax nuances is highly advisable.

• As one advisor remarked, "Family offices often underestimate the degree of complexity around wealth transfer and end up with hefty tax bills."

• Payroll taxes for employees based on office locations and functions

• VAT and sales tax obligations depending on the provision of services

• Potential self-employment taxes for participating family members

VIII. Outsourcing and Partnerships

Family offices are increasingly leveraging external expertise to enhance their capabilities, recognizing the value of specialized knowledge in managing complex wealth.


A. Private Banking Advisory

Accessing comprehensive wealth planning services:

• Coordinated advisory covering investments, trusts, taxes, and generational planning

• Facilitation of complex situations like business exits or liquidity events

• Access to advanced planning tools and analytics

Utilizing advanced banking capabilities and direct investment support:

• Customized credit facilities, deposit products, and cash management

• Robust capabilities for global payments, foreign exchange, and custody services

• Deal sourcing and capital raising assistance

• Introductions to investment banking and corporate finance advisory

• Enhanced due diligence resources and strategic advisory


B. Specialized Investment Managers

• Over 70% of family offices currently invest in private equity, up from just 20% in 2015

• 37% of family offices currently make direct investments alongside PE funds, while another 35% are considering adding direct deals

• This suggests a trend towards partnering with specialized investment managers, particularly in the private equity space


C. Technology Providers

The increasing complexity of family office operations, indicating a growing need for advanced technological solutions:

• The roles and responsibilities of modern family offices continue to expand rapidly, encompassing activities like managing investments across asset classes, tax planning, trust structuring, and more

• This complexity likely necessitates the implementation of cutting-edge portfolio management and reporting systems, as well as leveraging data analytics for enhanced decision-making

When selecting partners, we suggest that family offices should consider:

• Understanding of complex family dynamics and multigenerational needs

• Robust open architecture platform with extensive investment capabilities

• Proven track record working with ultra-high net worth clients

• Reputation for exceptional service quality and privacy

• Global reach and capabilities aligned with family footprints


Wrap Up

As we look towards 2025, family offices are poised to play an increasingly significant role in shaping global investment trends. By embracing new technologies, focusing on sustainable and impactful investments, and adapting to a rapidly changing global landscape, family offices are well-positioned to preserve and grow wealth for future generations.

The key to success will lie in balancing innovation with prudent risk management, and in fostering a long-term, values-driven approach to wealth stewardship.

SOURCES: Legacy Capital Fund Blog

II. Private Equity: A Key Focus Area

Private equity remains a cornerstone of family office investment strategies, with a particular emphasis on certain sectors, especially in technology and healthcare.

A. Shipping SaaS and Franchise Route Software

• The global shipping software market is projected to reach $6.72 billion by 2030, growing at a CAGR of 9.8%

• Key areas include transportation management systems, warehouse management systems, and last-mile delivery software

• The North American market accounted for more than 24.3% of the revenue share within the global industry

• Asia Pacific is expected to be the fastest-growing region, with a CAGR of 9.12% from 2022 to 2030


B. Subscription-Based Technologies

• The global subscription economy is projected to reach $1.5 trillion by 2025, up from $650 billion in 2020

• Sectors of interest include enterprise software, consumer services, and edtech

• An average US consumer spent $273 monthly on subscription services in 2021, compared to $237 monthly in 2018


C. Healthcare IT

• Family offices are backing startups leveraging AI to enhance clinical decision-making and operational efficiency

• Investments in digital mental health platforms are increasing due to growing demand for mental health services

• The integration of data analytics and AI in healthcare IT is transforming how healthcare providers analyze patient data, predict outcomes, and personalize care

Key investment examples include:

• 4Point0's $12 million investment in Fitterfly, a digital therapy platform for weight loss and diabetes management

• Interplay Family Office's $50 million series B funding in Ophelia, specializing in online opioid addiction treatment

• Dolby Family Ventures' investments in Paradromics and Genemod, focusing on brain-computer interfaces and life sciences research management respectively

• Cox Enterprises' $14 million Series A funding for Motivo Health, providing remote clinical supervision for therapists

III. Impact Investing and ESG Integration

Impact investing is still in growth mode, even with market volatilities:


A. Rise of Impact Investing

• 39% of family offices currently pursue impact investments

• Common focus areas include renewable energy, affordable housing, and community development initiatives

• The IFC reports that $2.3 trillion of assets have an intent for impact, with $636 billion having clear impact management and measurement processes in place

• Over $400 billion is managed in accordance with the Impact Principles, the market standard for impact investment portfolio management


B. ESG Integration

• 42% of family offices now engage in ESG investing, up from 25% in 2019

• 68% of next-generation family members are prioritizing sustainable investing

• Research shows that companies with high ESG ratings have delivered superior returns with lower risk compared to low-rated peers


C. Implementation Challenges

Family offices face several challenges in implementing effective ESG and impact investing programs:

• Lack of standardized frameworks and inconsistent reporting from managers

• Limited availability of investment products across all asset classes and risk profiles

• Balancing financial returns with values-based impact priorities

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