Institutional family offices have become major forces in public and private markets.
They have increased in size, sophistication and influence. Their needs are increasingly global, complex and multifaceted. They are often leading indicators of the most interesting and exciting investment trends, but they also rely upon experienced advisors for bespoke investment opportunities, curated content and networking with their peers.
Looking across the family office landscape can provide strong indicators of the next megatrends. To this end, Goldman Sachs hosted our fifth annual Apex Family Office Symposium last month for 170 family office investors from 15 countries worldwide. We talked with them about the macroeconomic environment, opportunities across public and private markets, the evolving geopolitical landscape, the current M&A and capital markets backdrop, best practices for building a successful multigenerational family office, thematic investing and other topics.
Alternative investment opportunities—and the asset class’s outperformance—continue to be top of mind for family offices. In the survey we conducted in 2023, institutional family offices reported high allocations to alternatives: 44%. In part, that is because private equity and private credit consistently outperformed global public markets on 10, 15 and 20-year time horizons, according to Cambridge Associates.
During a live poll of our recent symposium attendees, 60% planned to add exposure to private equity over the next year, 53% to public equities and 41% to private credit. Because they face little external pressure and are not necessarily held to stated benchmarks, family offices can be long-term investors.
Unsurprisingly, when drilling down to specific themes, artificial intelligence was an area of major focus and discussion for a few reasons. The first movers in the AI trade, chiefly many of the “Magnificent 7” companies, experienced material outperformance as initial optimism around growth translated into meaningful earnings results. Many family offices have been well invested in these early winners, with technology and innovation continuing to be prevalent themes.
Focus is shifting to second—and third-order perceived beneficiaries of massive capital infusion in the AI space. These include data centers, energy infrastructure and producers of electric components and equipment—companies crucial to powering the long-term adoption of these technologies.
Private real estate is another big theme. Many family offices achieved wealth through real estate or have experience in the asset class over cycles, oftentimes with multi-generational investment horizons. They see this as an interesting time in the market, in light of the downward pressure on values that have resulted from higher costs of capital, shifts in the lender base as regional banks pull back and alternative sources step up, and structural changes that have taken place across real estate markets over the last decade.
Many family offices are focusing on when the inflection point will occur. There was also animated talk around the looming debt maturity wall and how the digitization of the US and global economies influences real estate markets.
The sports ecosystem also continues to draw family office attention, with sessions on sports at our symposiums proving immensely popular over the last few years. With additional capital focused on it, many family offices remain interested in learning more about opportunities in this space, given its largely uncorrelated nature relative to financial markets. More than that, sports are an area of significant passion—and pride—for many family offices.
Major sports team valuations continue to climb, driven by rapid rises in media contract values and sponsorships. Live streaming growth has enhanced engagement with broader audiences, as has leveraging the acceleration in the global sports betting industry.
Another dominant theme is energy transition. Family offices are active players across that value chain, focused on global investment opportunities ranging from the development of green hydrogen through storage and next-generation nuclear power facilities to batteries, battery storage recycling, transmission and electric vehicles.
Many of the investing themes family offices focus on are best suited for long-term patient capital. That trend can surely be expected to continue, creating investment opportunities as new sectors and companies mature. Investors seeking the next big megatrends should watch the moves of family offices, an increasingly active and important force in the investment community.
Anushka Gupta is Head of Goldman Sachs Apex Family Office Coverage (Americas).