Globally, family offices have slowed their allocation to private equity on a median basis for two years, data from Preqin shows.

The median was 16% at the end of December 2023 compared to 17% at the end of December 2022. Median allocation by family offices reached as high as 20% in 2020 and 2021, the highest level since 2015, the data shows.

Bright spots among alternatives

"What we're seeing actually is a bit of a shift away from adding more illiquids," William Marr, senior managing director of the wealth management group at hedge fund Welton Investment Partners LLC, told S&P Global Market Intelligence.

The period between 2010 and 2020 saw a big wave of investments in illiquid assets, including private equity, private debt and private real estate, and many family offices have subsequently reached their allocation limit for illiquid investments in their portfolios, Marr said.

However, Marr said there are specific segments such as private debt and private equity secondaries where "there's a tremendous amount of demand, including from family offices."

Indeed, in KKR & Co. Inc.'s Family Capital Survey 2023, family office chief investment officers signaled the intention to increase exposure to alternative assets, specifically private credit, infrastructure and private equity, in 2024.

Investment adviser and wealth manager Align Impact LLC CIO Matthew Weatherley-White told Market Intelligence that the firm's clients — which include individuals, families, foundations, institutions and advisers — "continue to express the desire to have increased exposure to private equity and private credit."

PE firms chasing private wealth

The larger private equity firms are currently targeting private wealth to expand their investor base. Firms such as KKR and Blackstone Inc. have launched strategies focused on wealthy individual investors and family offices.

KKR has raised roughly $75 billion, or about 13.6%, of the firm's $553 billion assets under management from non-institutional private wealth as of Dec. 31, 2023. Blackstone, on the other hand, estimates that private wealth represents an up to $80 trillion opportunity. Blackstone's first-ever private equity fund open to individual investors, Blackstone Private Equity Strategies Fund LP, held a $1.3 billion first close in January.

Biggest allocation to PE

Vivaldi Capital Management LP topped the list of wealth managers with the largest family office allocation to private equity with $3.13 billion as of March 19, according to data from Market Intelligence.

– Download a spreadsheet with data featured in this article. – Read about trends in private equity-backed M&A in the asset management industry. – Read about the declining private equity investments in Taiwan.

Four other managers had more than a $1 billion family office allocation to private equity: Align Impact, CoastEdge Partners LLC, Munich Private Equity AG and BNY Mellon Wealth Management.