Alternative investments offer unique opportunities for growth and alignment with values, making them an essential part of modern family office strategies. For example, according to a recent JP Morgan report, family offices allocate almost half of their portfolios to alternative assets, which makes these investments increasingly vital for achieving both diversification and impact. Here’s a closer look at practical approaches your family office can use to maximize your alternative investment portfolio. Family offices are often inundated with investment ideas from family members, friends, and other close contacts, making it easy to fall into reactive or impulse-driven decisions. To maintain a disciplined approach, it is essential for family offices to establish a clear investment mandate. This mandate serves as a guiding framework, helping you stay focused and avoid being swayed by market trends or social pressures on the next shiny thing. This starts with setting specific objectives, such as whether you aim for wealth preservation, impact investing, or aggressive growth. Within this framework, target allocations to alternative investments should be set to ensure diversification across sectors, time horizons, and asset types, giving the portfolio a balanced structure. It’s also crucial to establish due diligence standards, with protocols for assessing new opportunities based on factors like risk tolerance and expected returns, which supports objectivity and minimizes distractions. By putting a well-defined Investment Policy Statement (IPS) or methodology in place, you can create a consistent approach for evaluating new opportunities, ultimately enhancing your family office’s ability to make decisions aligned with long-term goals. Family offices need to balance immediate liquidity requirements with the longer time horizons that alternative investments typically demand. This tension is especially relevant as private credit grows in popularity among investors who prefer regular distributions and shorter investment cycles. While private credit offers a more liquid option, alternative assets often provide higher returns when held over extended periods. To effectively manage this balance, you can explore diverse investment structures, such as revenue-based returns or equity components within private credit deals, to achieve both liquidity and growth. Adjusting allocations based on market conditions, including interest rate trends that influence asset class returns, can further optimize this balance. Set specific liquidity targets within the portfolio—determining what portion should remain accessible versus committed long-term—to ensure financial flexibility while positioning for the potential gains of alternative assets. This strategic approach allows you to meet both short-term needs and long-term objectives, achieving a blend of financial security and capital appreciation. Navigating private markets can often feel isolating for family offices, and working independently can limit your exposure to broader market insights. Establish a strong co-investment network to gain access to essential information on market trends, deal structures, and investment standards. By engaging with like-minded investors—other family offices or private investors—you can foster mutual learning, uncover new opportunities, and gain insights into how others approach similar investments. Participating in relevant industry groups or investment forums further expands this network, keeping you current on emerging trends and market shifts. Leveraging an advisory board with diverse expertise also brings additional perspectives, helping to mitigate risks and offer informed evaluations of potential deals. A well-developed co-investment network strengthens your family office’s capacity for making informed, confident decisions, turning what could be an isolated process into one rich with shared insights and strategic support. Given the diverse sources of information and often limited reporting standards in private markets, technology plays a vital role in simplifying due diligence and investment monitoring. By implementing centralized documentation and data management systems, you can efficiently organize performance updates, qualitative insights, and due diligence reports. This consolidated approach allows for easy access to historical data and a comprehensive view of portfolio health. For example, Clockwork provides a single point of access for portfolio views, document storage, and performance tracking, facilitating collaboration with advisors and supporting informed decision-making. Regular review protocols can also be established within the system, ensuring that each investment’s performance aligns with the family office’s broader strategy. Monitoring should encompass both qualitative insights and quantitative data, as private investments often depend on unique growth factors beyond financial metrics alone. With the right technology, you can streamline due diligence and maintain a structured approach to ongoing monitoring, adapting to new data as necessary while ensuring alignment with long-term goals. Treat private market investing as an opportunity to learn. In private markets, you often get a first-hand view of emerging trends, such as how nimble companies are incorporating technologies like AI or responding to shifts in M&A activity. These early insights offer a window into potential future developments in public markets, where companies may later adapt to similar innovations and changes. By understanding these trends early on, you can better anticipate how public companies or funds might react, which enables you to position your portfolio accordingly. Additionally, in private investments, you have direct access to operators and managers—something not permitted in regulated public markets. This allows you to gather unfiltered, real-time information from those closest to the business, offering practical insights that can greatly influence your investment strategies. Lastly, private investing can simply be more fun! Beyond financial returns, private investing offers a more personal and engaging experience compared to public markets. When investing in private companies, there is often a deeper connection to the businesses and the people behind them. You're not just watching stock prices move on a ticker—you’re involved with passionate founders, innovative ideas, and real stories. This proximity to a company’s mission and growth journey creates a greater sense of involvement and satisfaction. Many investors find private investments more rewarding on a personal level, as they become emotionally invested in the success of the businesses and managers they support. This unique connection makes private investing not only a strategic choice but also a fulfilling one. As the number of public companies declines and more businesses choose to remain private, family offices have a growing opportunity to expand their alternative investments. Private markets now offer a broader array of investments, allowing family offices to grow their wealth while achieving social impact. This trend highlights the importance of viewing alternative investments as a fundamental part of the portfolio. By following these strategies, you can better manage the complexities of alternative investments, building resilient and growth-focused portfolios that align with your values. About the Author Alex Goodman is a private investment specialist for family offices and a Founding Partner of Clockwork. In his role, Alex ensures Clockwork stands up to the scrutiny of the world’s top private investors and has led the growth of his firm and platform from concept to a robust platform tracking $6B+ in private assets with a multi-national team of 30+.1. Define a Clear Investment Mandate
2. Balance Liquidity Needs With Long-Term Growth Objectives
3. Build a Trusted Co-investment Network for Market Insights
4. Use Technology to Streamline Due Diligence and Investment Monitoring
5. Maximize Learning Opportunities
6. Have Fun and Enjoy the Ride
Final Thoughts
6 Key Strategies for Family Offices in Alternative Investments
