Key Takeaways
- • Family offices are allocating 52% of assets to alternatives on average, representing a 200 basis point increase since 2020, according to KKR's "Loud and Clear" research based on a proprietary survey of 75+ chief investment officers overseeing $3 billion in assets on average.
- • Real Assets are experiencing significant diversification within the alternatives space, with family offices planning to increase allocations to Private Credit, Infrastructure, and Private Equity at the expense of Public Equities exposure.
- • Cash positions remain elevated at 9% across surveyed family offices, suggesting investors are not taking sufficient risk relative to current market conditions despite the shift toward alternatives.
- • Family office CIOs are leveraging longer-term investment horizons and owner/operator mentalities to capture the illiquidity premium, employ enhanced hedging techniques, and capitalize on market dislocations—positioning them as potential outperformers through market cycles.
- • Key investment themes driving allocation decisions include supply chain disruption, industrial automation, artificial intelligence, and cybersecurity, with family offices focusing on tax-efficient capital compounding strategies aligned with their multi-generational wealth mandates.
Summary
KKR released research titled "Loud and Clear" authored by Henry McVey, Chief Investment Officer of KKR's Balance Sheet and Head of Global Macro and Asset Allocation, documenting a significant structural shift in family office asset allocation patterns. The analysis is grounded in a proprietary survey of more than 75 chief investment officers who collectively oversee approximately $3 billion in assets on average, providing a detailed snapshot of how the family office segment is repositioning capital.
The headline finding reflects a pronounced pivot toward alternatives: family offices are currently allocating 52% of total assets to alternatives on average, representing a 200 basis point increase from 2020 levels. This migration represents a systematic reallocation away from traditional public markets, with family offices deliberately reducing Public Equities exposure in favor of illiquid, higher-yielding alternative strategies. McVey characterized the shift as a positive development, noting that "this segment of the market is changing – and for the better," highlighting how family offices are increasingly sophisticated in harvesting the illiquidity premium and employing superior risk management techniques.
The survey identifies specific allocation priorities within the alternatives universe. Family offices are explicitly planning to increase allocations to Private Credit, Infrastructure, and Private Equity, reflecting a preference for yield-generating and infrastructure-linked strategies in the current interest rate environment. Despite this aggressive alternatives positioning, cash allocations remain elevated at 9%, a data point McVey interprets as evidence that many investors are underweighting risk relative to current market opportunities. This cash buffer may reflect both strategic optionality for opportunistic deployment and conservatism regarding near-term valuation risks.
Beyond allocation mechanics, the research highlights how family offices are leveraging their structural advantages. Their longer time horizons and owner/operator mentalities enable them to identify and profit from market dislocations that shorter-duration institutional investors cannot exploit. Key thematic investment areas driving decisions include supply chain resilience, industrial automation, artificial intelligence capabilities, and cybersecurity infrastructure—themes that align with multi-year secular trends. Family offices are also demonstrating enhanced sophistication in tax efficiency and capital compounding strategies designed to build generational wealth, with allocation frameworks paralleling KKR's own Balance Sheet investment approach across diversified real assets and thematic exposures.
The headline finding reflects a pronounced pivot toward alternatives: family offices are currently allocating 52% of total assets to alternatives on average, representing a 200 basis point increase from 2020 levels. This migration represents a systematic reallocation away from traditional public markets, with family offices deliberately reducing Public Equities exposure in favor of illiquid, higher-yielding alternative strategies. McVey characterized the shift as a positive development, noting that "this segment of the market is changing – and for the better," highlighting how family offices are increasingly sophisticated in harvesting the illiquidity premium and employing superior risk management techniques.
The survey identifies specific allocation priorities within the alternatives universe. Family offices are explicitly planning to increase allocations to Private Credit, Infrastructure, and Private Equity, reflecting a preference for yield-generating and infrastructure-linked strategies in the current interest rate environment. Despite this aggressive alternatives positioning, cash allocations remain elevated at 9%, a data point McVey interprets as evidence that many investors are underweighting risk relative to current market opportunities. This cash buffer may reflect both strategic optionality for opportunistic deployment and conservatism regarding near-term valuation risks.
Beyond allocation mechanics, the research highlights how family offices are leveraging their structural advantages. Their longer time horizons and owner/operator mentalities enable them to identify and profit from market dislocations that shorter-duration institutional investors cannot exploit. Key thematic investment areas driving decisions include supply chain resilience, industrial automation, artificial intelligence capabilities, and cybersecurity infrastructure—themes that align with multi-year secular trends. Family offices are also demonstrating enhanced sophistication in tax efficiency and capital compounding strategies designed to build generational wealth, with allocation frameworks paralleling KKR's own Balance Sheet investment approach across diversified real assets and thematic exposures.
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