Family offices double down on private credit and infrastructure during private equity slump, survey finds
Nearly one-third (32%) of single-family offices planned to increase their allocations to private credit this year, according to the survey. The second most-popular asset class was infrastructure, with 30% of respondents reporting they intend to invest more in the sector through either debt or equity. The survey polled 175 family offices overseeing more than $320 billion combined between March 17 and May 19.
Private equity still has positive momentum, though 12% of respondents said they plan to decrease their allocations to funds or direct investments. When asked about the asset class' prospects this year, 30% reported feeling optimistic while 22% said their attitude was pessimistic.
BlackRock's Armando Senra told CNBC that family offices overall are still investing more capital in private equity. They are, however, spreading their bets when it comes to private markets, hence the growing market share of private credit and infrastructure.
"Private equity continues to be a centerpiece of the portfolio," said Senra, who leads the asset manager's institutional business in the Americas. "I think that what you see is more of a desire to diversify for a number of reasons."
Liquidity is a key factor, he said, as the slowdown in exits means private equity investors have to wait longer for returns.
Senra also cited the low-risk appeal of infrastructure investing, which he said can provide a "private-equity-type return with significantly lower risk." Three-quarters of respondents to the BlackRock survey reported feeling bullish or optimistic about infrastructure, with only 5% expressing pessimism.
The sector is also a way for family offices to invest in the artificial intelligence boom.
"AI has big infrastructure needs," Senra said, noting increased demand for data centers and improved energy grids.
In May, Jeff Bezos' family office backed a $155 million seed round for Atlas Data Storage, a firm that uses a DNA-style system to store data more efficiently and at a lower cost.
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As for private credit, some family offices are wary of the hype. While 51% of respondents said they were optimistic or bullish on private credit, 21% reported pessimistic or bearish attitudes. The rush of capital into private credit has raised concerns about the quality of the borrowing companies and how many would default on loans in the event of a recession.
Senra said caution is natural when an asset class surges in popularity.
"I think that whenever you have enough class that captures a lot of attention, you really need to separate those managers that have experience across different market environments," he said.
That said, 62% of respondents favored special situation debt, which is typically extended to companies that are restructuring or are facing stress. The second most-preferred private debt category was direct lending. Done right, according to the report, private credit can offer more investor protection than private equity.
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Chicago Tribune
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China pushes back at US demands to stop buying Russian and Iranian oil
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Lindsey Graham, a Republican from South Carolina, is pushing for sanctions and tariffs on Russia and its financial backers. In April, he introduced a bill that would authorize the president to impose tariffs as high as 500% not only on Russia but on any country that 'knowingly' buys oil, uranium, natural gas, petroleum products or petrochemical products from Russia. 'The purpose of this legislation is to break the cycle of China — a communist dictatorship — buying oil below market price from Putin's Russia, which empowers his war machine to kill innocent Ukrainian civilians,' Graham said in a June statement. The bill has 84 co-sponsors in the 100-seat Senate. A corresponding House version has been introduced, also with bipartisan support. Republicans say they stand ready to move on the sanctions legislation if Trump asks them to do so, but the bill is on hold for now.
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Housing market In May, Citi Research recalled that the late economist Ed Leamer famously published a paper in 2007 that said residential investment is the best leading indicator of an oncoming recession. 'We would be wise to heed his warning,' Citi said. In fact, residential fixed investment shrank 4.6% in the second quarter, according to data released Wednesday, after contracting 1.3% in the first quarter. And overall construction spending continued to decline in June, led by a steep plunge in new single-family homes. That's as mortgage rates remain elevated, representing a major obstacle to affordability, while home prices are still high. 'Residential fixed investment is the most interest rate sensitive sector in the economy and is now signaling that mortgage rates around 7% are too high to sustain an expansion,' Citi said in May. Labor market Citi economists have long been among the less bullish on Wall Street, and before Friday's startling payroll data, they had already sniffed out signs of weakness. In particular, they flagged a dip in the labor force participation rate, which had suppressed the unemployment rate as it meant fewer people were looking for work. Citi downplayed the notion that Trump's immigration crackdown was primarily responsible for the lower participation rate. Instead, economists pointed to low hiring as an indication of weaker demand for workers. On Friday, Citi saw its prior warnings play out and predicted Wall Street would start to come around. 'Softness that had been evident in details of the jobs report is now apparent in the headline numbers,' the bank said. 'Markets and Fed officials should now more closely mirror our view that a low-hiring labor market, together with slowing growth create downside risk to employment and reduce the risk of persistent inflation.' This story was originally featured on
Yahoo
3 hours ago
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Wall Street's view of a ‘Kevlar economy' has just been shattered, but red flags were lurking under the radar
Just as Wall Street was warming up to the hope that the U.S. economy was bulletproof amid President Donald Trump's trade war, the recent batch of indicators has punctured that notion. But not everyone was surprised, as some economists had previously sounded the alarm on various red flags that are associated with downturns. The recent batch of indicators has punctured the notion on Wall Street that the U.S. economy is bulletproof and can withstand headwinds like President Donald Trump's trade war. That was evident in Friday's stock market selloff as the dismal jobs report and shocking downward revisions to earlier months raised recession fears. Just days earlier, Rick Rieder, chief investment officer of global fixed income at BlackRock, said the US was 'one of the world's most shock‑resistant economies.' But not everyone was surprised, as some on Wall Street had previously sounded the alarm on overoptimism and various red flags that are associated with downturns. In a note on Tuesday, James St. Aubin, CIO of Ocean Park Asset Management, warned that investors were leaning too heavily on the narrative of economic resiliency. The idea of a 'Kevlar economy' had fueled complacency that was showing up in stretched valuations, tight credit spreads, and an underpricing of risk, he added, referring to the synthetic fiber used in bulletproof vests. One of the risks is political pressure creeping into the Federal Reserve's decision-making, St. Aubin said. For months, Trump and the other White House officials have demanded Fed rate cuts, even suggesting that cost overruns on a headquarters renovation project are grounds for Chairman Jerome Powell to be ousted. Another risk is that stock market investors viewed tariffs as a temporary speed bump that would be offset by tax cuts and the tech sector's capital spending splurge on AI. But St. Aubin pointed out that tariffs hit businesses unevenly, with some are far more exposed than others. 'If you believe in resiliency too much, you're not being fully compensated for the risks you're taking,' he added. 'Something always goes wrong eventually — whether it's a risk hiding in plain sight or something you couldn't see coming.' Consumer spending on services To be sure, the U.S. economy had previously demonstrated surprising durability. In 2022, after the Fed launched its most aggressive rate-hiking campaign in more than 40 years, Wall Street widely assumed a recession would follow. But it never came, and inflation cooled sharply. And earlier this year, economists feared Trump's tariffs would fuel a big spike in inflation. But while some import-sensitive areas have seen an uptick, the overall rate has been more muted, so far. However, a deeper dive into some of the headline numbers revealed troubling signs. Last month, economists at Wells Fargo pointed out that although discretionary spending on goods had held up, spending on services dipped 0.3% through May on a year-over-year basis. 'That is admittedly a modest decline, but what makes it scary is that in 60+ years, this measure has only declined either during or immediately after recessions,' they wrote in a note. Spending on food services and recreational services, which includes things like gym memberships and streaming subscriptions, were barely higher. Meanwhile, transportation spending was down 1.1%, led by declines in auto maintenance, taxis and ride-sharing, and air travel, which had the steepest drop at 4.7%. 'The fact that households are putting off auto repair, not taking an Uber and cutting back or eliminating air travel points to stretched household budgets,' Wells Fargo said. Housing market In May, Citi Research recalled that the late economist Ed Leamer famously published a paper in 2007 that said residential investment is the best leading indicator of an oncoming recession. 'We would be wise to heed his warning,' Citi said. In fact, residential fixed investment shrank 4.6% in the second quarter, according to data released Wednesday, after contracting 1.3% in the first quarter. And overall construction spending continued to decline in June, led by a steep plunge in new single-family homes. That's as mortgage rates remain elevated, representing a major obstacle to affordability, while home prices are still high. 'Residential fixed investment is the most interest rate sensitive sector in the economy and is now signaling that mortgage rates around 7% are too high to sustain an expansion,' Citi said in May. Labor market Citi economists have long been among the less bullish on Wall Street, and before Friday's startling payroll data, they had already sniffed out signs of weakness. In particular, they flagged a dip in the labor force participation rate, which had suppressed the unemployment rate as it meant fewer people were looking for work. Citi downplayed the notion that Trump's immigration crackdown was primarily responsible for the lower participation rate. Instead, economists pointed to low hiring as an indication of weaker demand for workers. On Friday, Citi saw its prior warnings play out and predicted Wall Street would start to come around. 'Softness that had been evident in details of the jobs report is now apparent in the headline numbers,' the bank said. 'Markets and Fed officials should now more closely mirror our view that a low-hiring labor market, together with slowing growth create downside risk to employment and reduce the risk of persistent inflation.' This story was originally featured on
