Capital accumulation is accelerating. Globally, the number of high-net-worth (HNW) individuals is rising significantly as the HNW and family office landscape undergoes a profound transformation, fuelled by the imminent transfer of generational wealth. Over the next 20 years, an estimated $80+ trillion will be handed down to younger generations, with much of that capital flowing through family offices as millennials and Generation Z take the reins, bringing new values, challenges and priorities into play.

Family offices are continuing to exert their influence in the world of private capital as incomes and assets under management (AUM) are growing. This growth is expected to accelerate. At the same time, investment strategies are becoming more sophisticated and diversified as family offices recruit in-house talent to identify the best managers, optimise portfolios, track and monitor capital calls and distributions, and look for alpha, while minimising the costs.

Despite facing significant challenges, such as recessionary concerns, geopolitical tensions, inflation and lack of DPI, family offices are maintaining a cautiously optimistic outlook for 2025. Many are seeking accelerated returns and a quicker path to distributions to paid-in (DPI), a departure from the risk-averse, long-term approach favoured by many in the past.

At the same time, however, offices recognise the importance of building agile, resilient portfolios that can withstand market volatility. Whatever 2025 holds, we can be relatively confident that the volatility and unpredictable trading conditions will persist.

Here are my key investment predictions for how family offices will navigate the market in 2025, balancing risk and reward in these uncertain times.

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1. Faster distributions with enhanced downside protection

As economic uncertainty lingers, family offices will prioritise investment vehicles and strategies that offer a shorter holding period and faster path to DPI, such as specialised strategies in private debt, real assets and niche VC and private equity opportunities.

The focus will shift toward strategies that limit downside risk, preserving wealth while still capturing opportunities for growth. I expect to see family offices explore sectors like infrastructure, healthcare and technology, which generally offer more resilient, stable returns even during periods of wider market turbulence. At the same time, they are likely to emphasise diversification and adopt innovative approaches to maximise risk-adjusted performance.

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2. Higher allocations to alternative investments with increased focus on venture capital

More family offices will expand their portfolio allocations to alternative investments, such as private equity, venture capital, secondaries, fund of funds and private debt. In addition to looking for alpha, the goal will be to diversify, mitigate market risks and seek high-growth opportunities in emerging sectors like AI.

Venture capital, in particular, remains a largely untapped opportunity for family offices. Many offices are attracted to the space, not just by the prospect of outsized returns and ability to co-invest, but because they see alignment between the ‘change the world’ mindset of venture-backed startups and their own mission to create meaningful impact. The issue has long been the very long holding period, creating uncertainty when it comes to timing and magnitude of returns. 

That said, finding the best managers and the long holding period remain concerns for many.

Family offices must remain disciplined in their approach, ensuring that their VC and PE investments align with their overall risk tolerance and long-term objectives. The venture space is crowded, noisy and prone to hype and hyperbole. Co-investing alongside trusted managers will be crucial in mitigating these risks in the year ahead (preferably with no fees and no carry).

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3. The rise of Gen Z in decision-making

Over the past few years we’ve started to see an influx of Gen Z family members taking on more prominent roles within their family offices, and it’s only a matter of time before we see this influence felt in their investment strategies and decision making. 

Gen Zs are generally identified as being more tech-driven, globally aware and socially conscious than previous generations, which could translate to greater family office focus in areas such as AI, climate tech and renewable energy.

The challenge will be to avoid getting swept up in the excitement and hype of emerging technologies, and ensure that family offices maintain a disciplined, evidence-based approach to investing as the torch passes from one generation to the next. As always, the success of any private capital allocation hinges far more on the “holy trinity” of team, execution and timing, than it does the initial idea or technology itself. “Excitement” is not part of the formula, but thorough research, patience and strategic foresight are critical elements for sustained success.

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4. Increased focus on impact investing and ESG

In line with the rise of Gen Z family office investors, 2025 will likely see family offices allocating a higher percentage of their portfolios to impact investing and ESG-focused investments. Many offices are purpose-driven and motivated by making a positive difference in the world – and they’re spoilt for choice in the world of alternative investments, where more and more purpose-driven funds are springing up, focusing on everything from social impact to cleantech and renewable energy.

As ever, the difficulty here is finding investments that deliver strong financial returns while also aligning with ESG goals. Not all ESG investments are created equal, and family offices must do their due diligence and maintain a dispassionate, evidence-based approach to private capital allocation.

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5. Thriving amidst uncertainty

As we move into 2025, family offices are set to play a pivotal role in global capital markets. They will face ever-present headwinds - recessionary pressures, geopolitical tensions, inflationary risks and volatile markets to name but a few. Their ability to balance risk and reward will be key to ensuring resilience and taking advantage of the many opportunities that will emerge in the year ahead.

By focusing on diversified portfolios with shorter holding periods and exploring stable sectors like infrastructure, healthcare and technology, family offices can safeguard wealth while pursuing sustainable growth, even in turbulent environments.

And by combining long-term vision with innovative investment strategies, family offices will not only be able to weather today’s uncertainties—they will be able to create a lasting legacy of financial growth, social impact and meaningful change for generations to come.

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