The super-rich turning to alternative investments, market risks mount

Family offices are increasing exposure to hedge funds, private equity and infrastructure as concerns over inflation, concentrated equity markets and geopolitical uncertainty reshape wealth allocation.

The world’s wealthiest investors are increasing their exposure to alternative investments, including hedge funds, private equity, private credit and infrastructure, as they seek to diversify portfolios amid market volatility, persistent inflation and geopolitical uncertainty. The shift is changing how family offices and high-net-worth individuals allocate capital, although it does not signal a wholesale retreat from traditional stocks and bonds.

The trend is particularly visible in Asia-Pacific. JPMorgan Asset Management’s private wealth alternative assets in the region increased by 40% over the past 12 months, according to regional chief executive Dan Watkins, cited by CNBC in a report published on 11 November. Watkins said demand for alternative exposure was growing among both high-net-worth and ultra-high-net-worth clients.

The changing allocation pattern reflects concerns that equity markets have become increasingly concentrated and that the traditional relationship between stocks and bonds may offer less protection during periods of market stress. John Woods, chief investment officer for Asia at Lombard Odier, told CNBC that family offices were showing a sharp increase in planned allocations to alternative assets.

Alternative investments now account for 60% of single-family office portfolios, exceeding traditional assets for the first time, according to BNY Wealth data cited by CNBC. Traditional assets represented 41% of allocations in the report.

The figures point to a significant change in portfolio composition among wealthy families. Alternatives can provide access to private markets, specialised investment strategies and income streams that are not directly linked to the performance of listed equities.

However, the shift is not necessarily being financed by selling existing stock and bond holdings. Woods said much of the additional investment was coming from fresh capital and excess cash, rather than large-scale disposals of traditional assets.

That distinction is important. Wealthy investors appear to be broadening their portfolios rather than abandoning public markets. Citi Wealth’s 2026 survey of 351 family offices also found that public equities recorded the strongest net increase in allocations, despite growing interest in alternative investments.

Hedge funds are among the alternatives attracting the strongest interest from wealthy investors. Their appeal lies partly in strategies designed to generate returns that are less dependent on the overall direction of equity markets.

Olaolu Aganga, head of portfolio construction and analytics at Citi Wealth, said hedge funds had attracted the strongest recent interest among qualified clients. Some strategies seek to profit from differences in the performance of individual companies rather than relying primarily on broad market gains.

Private credit is another area drawing attention. It offers investors contractual income streams through lending outside conventional public bond markets, although returns and risks vary according to the borrower, loan structure and fund manager.

Inflation remains a central concern behind these allocation decisions. Citi’s family-office survey identified inflation as the leading concern among respondents, followed by interest rates, financial-system stability and market volatility.

For wealthy families, the objective is not simply to pursue higher returns. Alternative investments are also being considered as a means of generating income, preserving purchasing power and reducing dependence on a narrow group of listed companies.

Infrastructure has emerged as another major beneficiary of the movement towards private markets. The expansion of artificial intelligence is creating demand for data centres, electricity networks and digital connectivity, while electrification and energy security are generating additional investment requirements.

Thomas Roland Guyot, head of private markets investment specialists for Southeast Asia at UBS Unified Global Alternatives, told CNBC that investors were increasingly targeting assets supporting these areas.

Such investments may offer long-term growth opportunities and relatively predictable cash flows, particularly where revenues are supported by essential services or long-term contracts.

Fund-flow data cited by UBS showed that net inflows into open-ended infrastructure funds increased by 30% year on year in the 12 months through the first quarter of 2026, according to PitchBook.

The trend illustrates how technological investment is influencing wealth management beyond conventional technology stocks. Investors are seeking exposure to the physical infrastructure required to support digital expansion, including data centres and power systems.

Private equity remains an important component of alternative portfolios, but family offices are becoming more selective about how they participate.

According to Citi Wealth’s Aganga, some are favouring direct investments in companies, co-investments alongside private equity managers and purchases of existing fund stakes through secondary markets.

These approaches can give investors greater control over individual holdings or opportunities to acquire interests at discounts. They also require the capacity to assess businesses, managers and underlying assets in greater detail.

The expansion of evergreen and semi-liquid funds is making private-market investments more accessible to some wealthy investors. These structures can lower minimum investment thresholds and reduce certain administrative barriers associated with traditional private funds.

However, greater accessibility should not be confused with the ability to withdraw capital whenever an investor chooses.

Alternative assets carry risks that can be less visible than those associated with publicly traded securities. Private investments may lock up capital for years, while valuations can adjust slowly when market conditions deteriorate.

Even funds described as semi-liquid may restrict withdrawals when redemption requests rise sharply. JPMorgan’s Watkins cautioned that improved access does not necessarily mean improved liquidity.

Manager selection is another concern. Aganga warned that performance can vary substantially between investment managers, while infrequent valuations may make private assets appear less volatile than their underlying economic risks justify.

Investors must also consider overlapping exposure. A family office holding data centres through real estate, infrastructure and private equity funds may appear diversified across several asset classes while remaining heavily exposed to the same artificial-intelligence investment cycle.

This creates a challenge for portfolio construction: diversification must be assessed by underlying economic risks, not simply by the number of funds or investment categories held.

The growing interest in alternatives reflects a reassessment of how wealthy investors manage risk, income and long-term capital. Hedge funds, private credit, infrastructure and private equity are gaining a larger role as family offices respond to inflation concerns, concentrated equity markets and changing investment opportunities.

Yet the available survey findings and industry commentary do not suggest that traditional markets are becoming irrelevant. Public equities continue to attract allocations, while much new investment in alternatives is funded by additional capital.

The emerging pattern is therefore one of portfolio expansion and diversification rather than a complete shift away from stocks and bonds. Whether the strategy delivers stronger risk-adjusted returns will depend on asset selection, manager performance, valuation discipline and investors’ ability to manage liquidity over time.

Source: BNY Wealth — Family offices allocate 60% of portfolios to alternatives. J.P. Morgan — 2026 Global Family Office Report. Citi Wealth — 2026 Global Family Office Report. UBS — Global Family Office Report 2026. UBS — Global Family Office Report 2026 (full report)