In the uncertain landscape, more family offices are allocating to alternative assets

Geopolitical uncertainty has pushed global family offices to shift their risk management strategies into high gear, according to a recent survey.

Conducted by global asset manager BlackRock Inc. and market research firm Illuminas, the 2025 Global Family Office Survey involved 175 single family offices, which collectively manage more than US$320 billion in assets.

It revealed that geopolitical uncertainty was the most important issue for family offices (84%) and a key driver in their capital allocation decisions.

The survey found that 68% of family offices were increasing diversification, and 47% were increasing their use of a variety of return sources — including illiquid alternatives, ex-U.S. equities, liquid alternatives and cash — in response to geopolitical risks.

When asked about the global macroeconomic and markets outlook for 2025–26, 60% of family offices expressed pessimism.

“Global family offices entered 2025 with caution — a stance expected to continue through 2026 — as geopolitical tensions, policy shifts and market fragmentation weigh on sentiment,” said Armando Senra, head of the Americas institutional business for BlackRock.

In the uncertain geopolitical landscape, the survey found that alternative assets were taking up a larger portion of family office portfolios.

About 42% of family office portfolios included alternative assets, up from 39% in BlackRock’s 2022–23 survey.

The illiquidity premium (87%) and lower-correlated returns (67%) were cited as top reasons for investing in alternatives.

Private credit and infrastructure were the most favoured alternative asset classes. About 32% of family offices said they intended to increase allocations to private credit, while 30% planned to allocate more to infrastructure in 2025–26.

At the same time, the survey showed that 72% of family offices cited high fees as a barrier to investing in private markets, up from 40% in the previous survey. A lack of attractive valuations (47%) was the second most pressing challenge.

The research also examined family offices’ views on the use of AI.

Nearly half (49%) believed AI adoption would give them a competitive edge. Most respondents said they were already using AI or would consider it for tasks such as risk management and cash-flow modelling.

However, barriers remain: 47% cited privacy and data security concerns, 44% noted a lack of in-house AI expertise and 31% raised concerns about hallucinations or biases in AI models.

More family offices are investing in opportunities they believe will benefit from the growth of AI (51%) or in tech firms building AI solutions (45%) than in using AI internally to improve the investment process (33%).

The survey also found that many family offices were collaborating with external partners to address internal capability gaps.

Respondents noted weaknesses in areas such as reporting (57%), deal sourcing (63%) and private market analytics (75%).

To address these challenges, 22% said they had either used or would consider using an outsourced chief investment officer.

BlackRock partnered with Illuminas to conduct the research between March 17 and May 19. The study included surveys and in-depth interviews with chief investment officers and other key decision-makers at family offices globally.