Sundaram Alternates, a portfolio management services company released a report titled “From Legacy to Leadership,” highlighting the significant evolution of family offices as they transition from wealth preservation to a growth-focused mindset.

The report also projects the Assets Under Management (AUM) for mid to large-sized family offices in India to grow at a Compound Annual Growth Rate (CAGR) of 14 per cent over the next three years, which is an increase of 1.5 times.

Family Offices Increase Alternative Investments

The report also highlighted that family offices in India are increasingly getting into alternative investments, with a projected 5 per cent increase in allocations to 18 per cent over the next three years. Sundaram claims that this aligns with the global trend, in which family offices allocate more than 50 per cent of their assets to alternatives.

Vikaas M Sachdeva, Managing Director of Sundaram Alternates noted the shift reflects a strategic move toward diversification, niche investments, and a need to be part of active participation in India’s growth story, notably through startups and new-age ideas.

AIFs Gain Traction

According to the report, Alternative Investment Funds (AIFs) have gained a lot of traction among Indian family offices as a preferred medium to access private markets and startups. This is because AIFs offer a wide-arrayed portfolio that mitigates risks compared to single investments.

With the expertise provided by AIF managers in selecting opportunities across the risk-return spectrum, many family offices are opting for co-investments with existing funds to execute high-conviction strategies with minimal operational challenges.

Vikaas said on the findings, “Family offices in India are at a pivotal juncture where the integration of traditional values with modern investment strategies is driving significant growth. Our report underscores the importance of governance, diversification, and talent management in shaping the future of family offices.”

“As they navigate this complex landscape, it is crucial that they remain agile and forward-thinking to capitalize on emerging opportunities and sustain their legacy across generations.”

Key Challenges for Family Offices

Family offices in India face significant challenges in attracting and retaining talent, with over 55 per cent of respondents citing this as a primary concern according to the report, and this comes after promising growth and diversification.

The talent competition has spiked with wealth and asset managers as family offices require specific skills such as understanding the family, aligning with the parent entity philosophy, and navigating around complex family dynamics.