The number of family offices grew by over 21% last year, and has tripled since 2019. With more and more family offices, having the right investment strategy is key to ensuring client loyalty.
How do family offices invest their money?
There’s a lot of curiosity behind how family offices invest their money. They typically focus on a mix of diversification, alternative assets, long-term growth, and tailored strategies to protect and grow their clients’ wealth.
We’ll explore these strategies in this blog post.
Why diversification is great for Family Offices
You already know that diversification involves spreading your investments across various asset classes like stocks, bonds, and alternative assets to minimize risk.
For example, combining higher-risk tech stocks with more stable bonds can protect your portfolio from market volatility because it reduces exposure to any single asset class.
A real-life example is Yale University’s endowment, which has successfully diversified into alternative investments like private equity and hedge funds.
To learn more about how to diversify your own portfolio, click here.
Alternative asset investing
According to a KKR report, family offices allocated 52% of their portfolios to alternative investments in 2023, up from 42% in 2022.
Alternative investments, like private equity and small business finance notes, can be beneficial because they often have low correlation with traditional markets. So if the S&P 500 takes a dive, you won’t lose all your clients’ capital.
We offer a type of alternative asset called Small Business Finance notes.
They’ve achieved a 100% success rate in reaching their target return rates, and our 14% annualized yield note offers an interest rate three times higher than the 2-year US Treasury Rate (as of 6/1/2024).
Long-term growth
It’s important for family offices to focus on long-term investments because keeping family wealth intact for the future is key to making sure you don’t lose your clients over time.
Thinking about your investments this way can both preserve capital, and promote growth for the future generations of your clients.
One way you can do this is by investing in emerging markets that can offer growth potential over the long term. Data from Goldman Sachs suggests that these emerging markets might be able to withstand market volatility more effectively.
Long-term investments can also provide the stability needed to withstand economic fluctuations, like the one we’re experiencing right now.
Tailoring your investment strategies
Aligning your investment strategies with the unique financial objectives of your clients can also help you maintain client loyalty and keep your ARR high.
A key example of this is the Great Wealth Transfer, where wealth is shifting to Millennials who invest differently from their parents.
It’s a shift that demands you really thoughtfully tailor investments to meet the needs of these new clients, or risk losing them entirely.
One way that you can maintain Millennial clients is by focusing on ESG and ethical investments.
If you want to learn more about maintaining client loyalty among Millennials, click here.
What can I do now?
By diversifying, exploring alternative assets, aiming for long-term growth, and using tailored strategies, you can protect and grow your client’s wealth.
Create a free investor account today to access a wide range of investments designed specifically to help you achieve these goals.