KKR’s Henry McVey Says Leading Family Offices Plan to Allocate More to Alternatives in 2024

New Asset Allocation Report Based on Proprietary Survey Highlights the Growth Ambitions of Family Offices

KKR, a leading global investment firm, today released “Loud and Clear,” a new Insights piece by Henry McVey, CIO of KKR’s Balance Sheet and Head of Global Macro and Asset Allocation (GMAA).

Based on a proprietary survey of more than 75 Chief Investment Officers (CIOs) who oversee over three billion dollars in assets, on average, the report examines how family office CIOs are leveraging their longer-term focus and owner/operator mentality to create a sustainable competitive advantage.

“We hear the message ‘Loud and Clear’ that this segment of the market is changing – and for the better,” said McVey. “These investors are diversifying across asset classes, and as they mature, they are getting better at harnessing the value of the illiquidity premium to compound capital. They are also using better hedging techniques and increasing both their desire and ability to lean into dislocations, strengths that we believe will position them to be at the winner’s table at the end of this cycle.”

In the report, McVey notes several key parallels between the asset allocation objectives of KKR’s Balance Sheet and those of the surveyed CIOs. These include a focus on compounding capital in a tax efficient manner to build wealth and investing behind key themes such as supply chain disruption, industrial automation, artificial intelligence and the ‘security of everything.’ Other key takeaways from the survey included:

• Family offices are allocating more to Alternatives, with 52 percent of assets allocated to Alternatives on average, up 200 basis points since 2020.
• Within Alternatives, there is meaningful diversification including a significant jump in allocations to Real Assets.
• Cash positions are still high at nine percent, which further confirms our thesis that many investors are under-risked for today’s markets.
• Family offices are planning to allocate more to Private Credit, Infrastructure and Private Equity at the expense of Public Equities and Cash.
• We continue to see notable bifurcation in the asset allocation approaches between family offices set up within the last five years and those that had already scaled before COVID, with more seasoned family offices typically holding less cash and allocating more to Private Equity.
• There are pronounced regional differences in asset allocation. U.S. family offices allocated less to traditional Private Equity compared to counterparts in Latin America, Asia and Europe, while Asia-based family offices had relatively heavy allocations to Real Estate.
• CIOs are going against the grain to find value-based private market opportunities, especially in the Oil & Gas and Industrial sectors.
• Geopolitics is eclipsing inflation as the main concern for CIOs, with more than 40% of respondents identifying geopolitics as the single most important risk today.
• There is growing concern that more resources are required to support both the growth in assets under management and the increase in diversification across asset classes.

Links to access this report in full as well as an archive of Henry McVey's previous publications follow:

• To read the latest Insights, click here.
• To access the 2020 Family Capital survey, click here.
• For an archive of previous publications please visit www.KKRInsights.com.

About Henry McVey

Henry H. McVey joined KKR in 2011 and is Head of the Global Macro, Balance Sheet and Risk team. Mr. McVey also serves as Chief Investment Officer for the Firm’s Balance Sheet, oversees Firmwide Market Risk at KKR, and co-heads KKR’s Strategic Partnership Initiative. As part of these roles, he sits on the Firm’s Global Operating Committee and the Risk & Operations Committee. Prior to joining KKR, Mr. McVey was a Managing Director, Lead Portfolio Manager and Head of Global Macro and Asset Allocation at Morgan Stanley Investment Management (MSIM). Learn more about Mr. McVey here.

About KKR

KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR’s insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR’s investments may include the activities of its sponsored funds and insurance subsidiaries. For additional information about KKR & Co. Inc. (NYSE: KKR), please visit KKR’s website at www.kkr.com. For additional information about Global Atlantic Financial Group, please visit Global Atlantic Financial Group’s website at www.globalatlantic.com.

The views expressed in the report and summarized herein are the personal views of Henry McVey of KKR and do not necessarily reflect the views of KKR or the strategies and products that KKR offers or invests. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. This release is prepared solely for information purposes and should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or to adopt any investment strategy. This release contains projections or other forward-looking statements, which are based on beliefs, assumptions and expectations that may change as a result of many possible events or factors. If a change occurs, actual results may vary materially from those expressed in the forward-looking statements. All forward-looking statements speak only as of the date such statements are made, and neither KKR nor Mr. McVey assumes any duty to update such statements except as required by law.

KKR’s Balance Sheet refers to that portion of KKR’s corporate balance sheet that is primarily used to support KKR’s asset management business, including the general partners of KKR’s investment funds and other controlling interests.

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