Family offices recalibrate private assets strategies

Unlisted investments have long been of interest to family offices, but they are now being persuaded by private bankers to use a much broader toolkit of instruments.

As unlisted investments fast become an asset class of choice for wealthy families, private banks reveal that they are guiding these clients through an increasing variety of strategies.

Citi notes growing interest in ‘secondaries’ — where investors buy an ongoing private equity investment from another investor, instead of directly acquiring a position in a private company. This helps families seeking either liquidity exits or faster-turnaround entry points, says Anne McCosker, head of lending at Citi Wealth. She also highlights the rise in “revolving credit lines” to manage capital call cycles, which in turn enable “greater strategic agility”.

Large wealth managers say they are much more comfortable, from a broader private markets perspective, when families show they have an in-depth understanding of these often esoteric investments.

The new generation of family office leaders tends to bring consulting, banking, or private equity experience, which better equips them to drive complex decisions, says Hannes Hofmann, head of the global family office group at Citi Wealth. They are very interested in high-conviction secular growth areas, such as education, healthcare, AI and infrastructure, he adds.

Control and alignment

These preferences resonate with legal and strategic advisers elsewhere in the market. Simon Chadowitz, a partner at London law firm Fladgate, says the demand for control and alignment is reshaping the structures through which families deploy capital.

“We are seeing a pronounced shift among family offices and private banks toward direct real estate investment and co-investment,” he says. “Clients increasingly want greater control, transparency, and the ability to tailor investments to their long-term objectives.”

That shift is accompanied by rising demand for assets tied to structural themes, such as data centres aligned with AI infrastructure, logistics tied to ecommerce and healthcare properties driven by demographic trends.

“We are seeing a pronounced shift among family offices and private banks toward direct real estate investment and co-investment” —Simon Chadowitz, Fladgate

“The rise in investment into these sectors has changed the nature of legal advice required,” says Mr Chadowitz, citing the importance of negotiating increasingly complex energy contracts for data centres, licensing in healthcare, and ESG-related disclosure risks.

Private markets are fast becoming a key battleground for these thematic investment strategies, according to the BNP Paribas 2025 Thematics Barometer.

The survey found investors are increasingly turning to private assets to access innovation-led themes such as AI, healthcare and clean energy. These thematic allocations remain highest in traditional equity portfolios, especially in Asia. Europe and North America, however, are leading the shift toward private market exposures, with more than 20 per cent of investors in these regions already allocated to private vehicles.

“Thematic investing has emerged as a potent strategy for investors to harness the transformative power of the structural forces reshaping the global economy,” says Guillaume Wehry, co-head of product development strategies at BNP Paribas Asset Management. AI ranked as the top innovation theme globally, with 79 per cent of investors expressing interest, while renewable and clean energy continues to dominate among sustainability-led strategies.

Retail revolution

The broadening investor base in private markets is also reshaping product innovation and distribution. According to State Street’s 2025 Private Markets Survey, more than half of institutional investors now expect over 50 per cent of private market flows to come from semi-liquid, retail-style vehicles by 2027. The shift, described by State Street as a “retail revolution”, is being fuelled by new fund structures such as Luxembourg’s ELTIF 2.0 and the UK’s LTAF regime, alongside easing wealth thresholds and increased investor appetite for smoother, long-term returns.

Some experts including Amin Rajan, CEO of the Create-Research consultancy, have however cautioned about the consistency of long-term returns for private markets and say investors should expect lower returns in the future.

Investors are also being subjected to greater regulatory scrutiny, says Fladgate’s Mr Chadowitz, particularly those from other nations, accessing UK property through offshore entities. The Register of Overseas Entities is increasing transparency and shaping conversations around structuring and compliance, he says.

Local insight

But families are not abandoning fund structures entirely. In truth, they are becoming more selective. Francois Botha, founder of family office platform Simple, observes: “Direct investment continues to gain momentum. It allows for greater transparency, control, and alignment with values. That said, fund structures still offer access and diversification in markets where families lack local insight.”

In contrast to the opportunistic styles of prior cycles, today’s allocation strategies are more deliberate. “Families are becoming more intentional about how they allocate to the asset class,” Mr Botha adds. “There’s a move away from passive or opportunistic exposure and toward direct investments that serve strategic, generational, and operational objectives.”

“Direct investment continues to gain momentum. It allows for greater transparency, control, and alignment with values” — Francois Botha, Simple

For all the challenges of a tighter macro environment, real estate remains an integral part of the family office asset mix. “There is consensus among families that high-quality real estate in prime locations is scarce and it remains a long-term strategic allocation,” says Citi’s Mr Hofmann.

Faced with a combination of high financing costs, shifting risk appetites and evolving generational priorities, family offices are also refining their approach to real estate.

High finance

Long regarded as a core component of illiquid portfolios, the asset class is now being approached with a sharper strategic lens, emphasising yield, resilience and thematic alignment.

“Family offices around the world typically see private equity and real estate as core allocations within their illiquid bucket,” says Citi’s Mr Hofmann. “Most of the real estate investments are in specific projects, with a smaller allocation to funds, unlike private equity, where we see more balance between fund and direct exposure.”

According to Mr Hofmann, North American family offices are generally more heavily weighted to real estate, while their European counterparts lean more into private equity. However, the underlying principle remains consistent: real estate offers families a tangible yield generator, particularly when combined with private credit.

The current environment is prompting a more opportunistic posture, adds Citi’s Ms McCosker. “As the commercial real estate market improves, we are seeing family office clients globally become more active in terms of opportunistic property acquisition, supported by financing.”

That financing, though more expensive, is still being embraced. “Families prefer to consider financing, even in this higher rate environment, as opposed to disrupting their broader asset allocation or yield-enhancing assets,” Ms McCosker explains.

“We are seeing family offices consider shorter financing terms on a floating rate to assist with acquiring assets. As rates start to reduce, they will likely move to longer-term fixed-rate facilities.”

Across the board, families are steering away from capital-intensive development plays, opting instead for stabilised, income-generating assets. “As a general rule, most family offices do not have the patience for real estate development projects,” Mr Hofmann notes. “Infrastructure and logistics are areas many families are interested in, while data centres are a newer sector gaining traction.”

Hospitality, while considered opportunistically, remains “under observation” rather than part of today’s conviction-driven palate.

The theme of secular alignment is, however, echoed across Citi’s entire client base, where property fundamentals like scarcity, yield and long-term viability remain at the centre of decision-making.