By editor 
Family offices, the private wealth management entities catering to ultra-high-net-worth individuals, are undergoing a significant strategic shift in their investment approaches. Traditionally known for their diversified portfolios, these entities are increasingly pivoting towards private credit and infrastructure investments. This shift is not merely a fleeting trend but a calculated response to the evolving investment landscape, marked by declining returns in private equity, macroeconomic uncertainties, and the search for stable, high-yield assets.
The decline in private equity’s allure is a primary driver behind this shift. Historically, private equity (PE) has been a cornerstone of alternative investments, offering family offices access to promising companies before they go public. However, recent years have seen a notable slump in deal and exit values, with the exception of certain regions like the Asia-Pacific. This stagnation has been compounded by sky-high valuations, limited liquidity, and a backlog of “dry powder”—capital waiting to be deployed. The combination of these factors has led to stagnating returns and fewer attractive entry points, prompting family offices to explore alternative avenues for growth.
Private credit has emerged as a compelling alternative to private equity. Over one-third of family offices surveyed by BlackRock and KKR plan to increase their allocations to private credit in 2025 and beyond. This asset class, once a niche dominated by specialist hedge funds and institutional managers, has matured significantly. Family offices are now recognizing its potential to deliver attractive risk-adjusted returns. The appeal of private credit lies in its ability to fill the financing gap left by traditional banks, which have become more risk-averse due to regulatory pressures. Private lenders have stepped in to provide financing to mid-sized companies and real assets, offering predictable yields and downside protection. The senior-secured nature of private credit investments, along with robust controls embedded in lending agreements, provides a greater measure of security in an uncertain economic environment.
Infrastructure investments are another key area of focus for family offices. Over 30% of family offices polled expect to increase their allocations to infrastructure in the upcoming investment cycles. The enthusiasm for infrastructure stems from its ability to combine stability and long-term growth. Infrastructure projects, such as renewable energy, utilities, and transportation, often have regulated or inflation-linked cash flows, making them an attractive hedge against rising prices. Additionally, societal megatrends like the global push for net-zero emissions, the growing demand for AI and data infrastructure, and population-driven urbanization create a persistent need for new infrastructure. Family offices view these assets as not just defensive but also aligned with secular growth. The illiquidity premium associated with infrastructure assets further enhances their appeal, as they typically reward long-term investors with higher yields for their patience and commitment.
The broader context of this shift is the ongoing exodus from public equities and cash. Family offices have increased their average allocation to alternative assets to over 40%, with some allocating more than half of their portfolios to these assets. Public markets have lost their luster due to volatility, while rising interest rates and geopolitical uncertainty have made diversification more urgent. Private markets offer lower correlation to traditional asset classes, higher yields, and theoretically reduced volatility, although they come with their own set of risks, such as illiquidity and complex due diligence.
Family offices’ agility and long-term perspective set them apart from large institutional investors. Unlike pension funds or endowments, which are often constrained by bureaucracy and policy approvals, family offices can reallocate significant portions of their assets quickly. This independence allows them to seize opportunities in emerging managers and niche strategies within private credit and infrastructure, aiming for outsized returns and early-mover advantages. The rise of artificial intelligence and cloud computing is further driving infrastructure allocations. Data centers, energy grids, subsea cables, and water systems are all seeing massive new investments as the world’s digital appetite strains existing foundations. Family offices are increasingly viewing infrastructure as a growth play, critical to the digital transformation and new economic paradigms.
However, this strategic pivot is not without risks. As more capital flows into private credit and infrastructure, concerns about overcrowding and compressed returns are growing. The lack of liquidity in private markets can be a significant challenge, especially in volatile times. Additionally, the complexity and governance requirements of these assets demand specialized due diligence and hands-on oversight. Valuation discrepancies are another concern, as methods for marking private credit or infrastructure equity stakes to market are far less precise than for public securities, risking hidden losses. Family offices must therefore brace for an environment where picking the right managers, understanding underlying assets, and negotiating strong covenants are paramount.
Looking ahead, the aggressive tilt towards private credit and infrastructure shows no signs of slowing. Ultra-wealthy investors, with their appetite for yield and long investment horizons, are prepared to weather illiquidity and complexity. However, as more money chases these themes, those who bring real expertise, patience, and a willingness to hunt beyond the obvious will likely outperform. The competitive landscape is intensifying, with asset managers, insurers, pension funds, and even sovereign wealth funds jostling alongside family offices for the best private credit opportunities and infrastructure pipelines.
In conclusion, the strategic pivot by family offices towards private credit and infrastructure is a bold reset in their investment strategies. These asset classes offer stable yields, inflation protection, and the opportunity to ride structural megatrends. However, this evolution comes with growing pains, including excess competition, unfamiliar risks, and new operational demands. The family office playbook for 2025 and beyond is being written in real time, and as the world’s economic and technological engines shift gears, their bets on “alternatives” are fast becoming the new mainstream. For families seeking to safeguard and compound generational wealth, the challenge and the opportunity are the same: look past the headlines and surface trends, get hands-on with strategy and execution, and never underestimate the speed with which the next tide may roll in.