Institutional family offices have become a major force in public and private markets.
They have grown 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 on experienced advisors for custom investment opportunities, curated content and networking with their peers.
Looking at the family office landscape can provide strong indicators of upcoming megatrends. To that end, Goldman Sachs hosted our fifth annual Apex Family Office Symposium last month for 170 family office investors from 15 countries around the world. We talked to them about the macroeconomic environment, opportunities in public and private markets, the evolving geopolitical landscape, the current M&A and capital markets background, best practices for building a successful multi-generational family office, thematic investing and other topics. .
Alternative investment opportunities—and the good performance of the asset class—continue to be top of mind for family offices. In the survey we conducted in 2023, institutional family offices reported high distributions for alternatives: 44%. In part, that’s because private equity and private credit consistently outperform global public markets over 10-, 15- and 20-year time horizons, according to Cambridge Associates.
During a direct survey of our recent symposium attendees, 60% planned to increase 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 standards, family offices can be long-term investors.
Surprisingly, when coined into specific topics, artificial intelligence was an area of great focus and discussion for several reasons. The first movers in the AI trade, primarily many of the “Magnificent 7” companies, experienced strong material performance as initial optimism around growth translated into meaningful earnings results. Many family offices are well invested in these early winners, with technology and innovation continuing to be prevalent themes.
The focus is shifting to the perceived second- and third-order beneficiaries of the massive infusion of capital in the AI space. These include data centers, energy infrastructure, and electrical component and equipment manufacturers—companies essential to powering the long-term adoption of these technologies.
Private real estate is another big topic. Many family offices achieved wealth through real estate or have experience in the cyclical asset class, often with multi-generational investment horizons. They see this as an interesting time in the market, in light of the downward pressure on values that has resulted from higher capital costs, the changes in the lender base as regional banks retreat and alternative sources grow, and the structural changes that have taken place in real estate markets over the past decade.
Many family offices are focusing on when the tipping point will occur. There was also animated conversation about the looming wall of debt maturities and how the digitization of the US and global economies affects real estate markets.
The sports ecosystem also continues to attract the attention of the family office, with sessions on sports at our symposia becoming extremely popular over the past few years. With additional capital concentrated in it, many family offices remain interested in learning more about the opportunities in this space, given its largely uncorrelated nature with respect to the financial markets. Furthermore, sport is an area of significant passion and pride for many family offices.
Valuations of major sports teams continue to rise, fueled by rapidly increasing values of media contracts and sponsorships. The growth of live streaming has increased engagement with wider audiences, as has increased momentum in the global sports betting industry.
Another dominant theme is the energy transition. Family offices are active players across the value chain, focused on global investment opportunities ranging from green hydrogen development through storage and next-generation nuclear power facilities to batteries, battery storage recycling, transmission and electric vehicles.
Many of the investment themes that family offices focus on are best suited for long-term patient capital. This trend can certainly be expected to continue, creating investment opportunities as new sectors and companies mature. Investors looking for the next big megatrends should look to the family office movement, an increasingly active and important force in the investment community.
Anushka Gupta is Head of Goldman Sachs Apex Family Office Coverage (Americas).
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