KKR, a global investment leader, has unveiled profound insights in its latest release, "Loud and Clear," penned by Henry McVey, Chief Investment Officer of KKR’s Balance Sheet and Head of Global Macro and Asset Allocation (GMAA).
This report, grounded in a proprietary survey encompassing over 75 Chief Investment Officers (CIOs) responsible for assets exceeding three billion dollars on average, explores how family office CIOs leverage their long-term perspective and owner/operator mindset to establish a sustainable competitive advantage.
McVey remarks, "We hear the message 'Loud and Clear' that this segment of the market is changing – and for the better. These investors are diversifying across asset classes, maturing, and effectively harnessing the value of the illiquidity premium to compound capital."
Key Parallels and Takeaways:
The report identifies key parallels between the asset allocation goals of KKR’s Balance Sheet and the surveyed CIOs. This involves a shared focus on compounding capital tax-efficiently and investing in themes like supply chain disruption, industrial automation, artificial intelligence, and the ‘security of everything.’
Family offices are increasingly allocating assets to Alternatives, constituting 52 percent on average, marking a notable rise of 200 basis points since 2020.
Within Alternatives, diversification is evident, particularly in increased allocations to Real Assets.
Notably, cash positions remain high at nine percent, reinforcing the notion that many investors are cautiously positioned in today's markets.
CIOs plan to shift allocations towards Private Credit, Infrastructure, and Private Equity at the expense of Public Equities and Cash.
Bifurcation is observed between family offices established in the last five years and those scaled before COVID, with more seasoned offices typically holding less cash and allocating more to Private Equity.
Regional differences emerge in asset allocation, with U.S. family offices differing from counterparts in Latin America, Asia, and Europe, while Asia-based offices exhibit heavier allocations to Real Estate.
CIOs actively seek value-based private market opportunities, especially in the Oil & Gas and Industrial sectors, defying conventional trends.
Geopolitical concerns have surpassed inflation as the main worry for CIOs, with over 40% identifying geopolitics as the most significant risk today.
Growing apprehension arises about the need for additional resources to support the surge in assets under management and the escalating diversification across asset classes.
Investment Disclaimer: This information is for informational purposes only and does not constitute investment advice, endorsement, or a recommendation. Always conduct thorough research and consider consulting with a financial advisor before making investment decisions.