Two in three family offices looking to grow private debt allocation

Improved returns over meagre bond yields are a key driver of smaller institutions looking for private debt exposure.

Almost two-thirds of family offices and wealth managers are expected to increase their exposure to private debt, according to research.

A survey by aviation finance specialist Shearwater Aero Capital, found 63 percent of family office and wealth manager institutions intend to invest more in private debt between now and 2021, while 13 percent expect to invest less in the asset class.

Half of the 57 family offices and wealth managers surveyed said they favoured the asset class because it offers attractive returns in a low interest rate environment, while 27 percent said they would invest because of the poor returns offered by bonds. Additionally, 16 percent are investing in private debt as they expect stock markets to become more volatile.

Higher returns compared with other asset classes were considered the most attractive feature of private debt, cited by 70 percent of institutions surveyed. Two-thirds said they were attracted by the flexibility of the asset class and 59 percent said it was a good way to diversify portfolios.

Chris Miller, managing partner at Shearwater Aero Capital, said: “Our research shows family offices are placing a greater focus on investing in private debt, and we are certainly seeing this through our fund raising.

“Family offices currently have around 10.7 percent of their AUM in private debt, but our research shows that 32 percent of family offices and wealth managers interviewed expect this to be over 12 percent by 2022.”