The world's super-rich may be re-examining their investment strategy in response to rising economic uncertainty and geopolitical tensions. A new report from BlackRock (NYSE: BLK) indicates that they have developed an affinity for private credit offerings.
"They (the super-rich) are diversifying their exposure within private markets. While allocations used to be primarily into private equity growth, now what you see is high interest in private credit, the beginning of interest in infrastructure," said Armando Senra, head of the Americas institutional business at BlackRock.
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The report cites a general feeling among family offices that private credit offers the ideal combination of yield, liquidity, and returns. According to the report, which surveyed 175 family offices worldwide, over half of them have a positive outlook on private credit. It also notes 32% of the offices surveyed plan to increase their private equity holdings this year.
BlackRock says respondents indicated that their shift to private credit reflects growing uncertainty about "geopolitical tensions." Eighty-four percent of the offices surveyed indicated that they view geopolitical tension as a "key challenge." More importantly, the family offices said they expect their concerns about global instability to play a larger role in their investment decisions. A full 60% reported feeling "pessimistic" about their overall economic outlook.
The report found a consensus that the world is experiencing long-term, dramatic changes. "While there is a pervasive sense that we are witnessing a fundamental rewriting of the rules that have helped to shape markets since World War II, many family offices are hopeful that the downside to the global economy will be limited," the report said.
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It also noted that the family offices began the year with a wait-and-see approach to the economy. However, there was a general belief that the offices would be successful in achieving their projected returns. Those sentiments took a sharp negative turn after President Donald Trump announced sweeping his so-called "liberation day" tariffs on April 2. The report showed 57% of the offices had a "bearish outlook" on the global economy before Liberation Day.
At the same time, 39% expressed concerns about there being an economic slowdown in the U.S. The offices with a "bearish outlook" on the global economy increased to 62% after the Liberation Day announcements. At the same time, 43% of them were worried about the prospects of the U.S. economy slowing down. Fears about "persistent or accelerating inflation" went from 27% before Liberation Day to 32% after it.
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BlackRock notes this combination of fear, pessimism, and concern about the U.S. economy is causing family offices to strategize on how to reallocate their portfolios. Six of 10 offices indicated plans to increase portfolio diversification, and only 31% reported satisfaction with current liquidity levels. This might explain the current affinity for private credit offerings.
BlackRock's report shows that 32% of family offices anticipate increasing portfolio allocation in private credit offerings in 2025-2026. That was the highest total for any of the alternative asset classes in the survey. However, the offices in the survey did express one concern with the shift to private equity: fees. Nearly three in four– 72%–cited high fees as the "most significant challenge" in private market investments.
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