Family offices boost exposure to unlisted shares despite policy tightening and concerns over valuations
Billionaire investors are increasing their exposure to private equity in spite of concerns that the end of loose monetary policy will hurt weaker firms in the sector.
Family offices managing vast fortunes for wealthy individuals have increased their allocation to private equity from about 15 per cent in 2019 to a fifth last year — the largest gain for any asset class. Many plan to keep putting more money into private companies over the next five years, according to a report by Swiss bank UBS.
Anxiety around the prospects for private equity comes as money managers, from pension to large asset managers, are pouring more money into private assets including buyout funds, real estate and private debt. Investors have been attracted by promises of higher returns and the appeal of potential inflation hedges. The private equity industry has grown to manage more than $6tn, according to McKinsey.
UBS found the gains for private equity had come as billionaires’ investment offices plan to cut back on their exposure to bonds, which have already attracted lower allocations in recent years. Faith in the traditional argument for holding bonds as a counterweight to equities has weakened, with 63 per cent of family offices saying that they believe high-quality fixed income no longer helps to diversify risks in their portfolios.
Read more: FT
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