The richest investors are letting their stock exposure climb
Family offices are becoming more exposed to the stock market.
According to the latest CNBC Family Office Portfolio Tracker, powered by Addepar, single-family offices held 37% of their portfolios in public equities during the second quarter, up from 34% in the first quarter.
For investors managing generational wealth, a three-percentage-point move in a single quarter is meaningful. Addepar CEO Eric Poirier said it was the largest quarter-over-quarter increase in public equities the firm has seen in roughly three to four years.
The data is also unusually useful. It covers hundreds of family offices representing more than $1.4 trillion in assets, based on actual portfolio holdings rather than survey responses.
At first glance, the message looks simple: the ultra-wealthy are getting more bullish on stocks.
We think the real story is more nuanced — and more interesting.
Family offices weren’t necessarily pouring billions into equities during the quarter. Stocks gained value while several private-market holdings were marked down. But instead of selling public equities to bring allocations back down, many family offices appear comfortable allowing stocks to become a larger piece of their portfolios.
For long-term investors who are usually obsessive about diversification, choosing not to rebalance can be a decision in itself.
This wasn’t simply a three-point buying spree
The S&P 500 rose roughly 15% during the second quarter, naturally increasing the weight of stocks inside diversified portfolios.
At the same time, family-office exposure to private companies, private equity, venture capital, private credit and real estate declined. Overall alternative allocations fell to 46% from 49%, the largest decrease in years.
Some of the move came from weaker valuations rather than money physically leaving those assets.
Private credit stands out.
Addepar found that 18% of private credit funds launched in 2020 or later have recorded markdowns in net asset value. For private-credit funds with vintages dating back to 2016, the comparable figure during the first four years of their lives was around 9%.
Real estate and venture-capital funds have also faced markdowns.
So we would not describe the second quarter as wealthy families suddenly abandoning private markets to chase stocks.
The allocation change came from two forces moving in opposite directions: public markets were repricing higher while parts of the private market were being repriced lower.
The interesting part is what happened next.
Family offices let it happen.
Not rebalancing after a rally tells us something
Large institutional portfolios usually operate around allocation targets.
If stocks rally sharply and suddenly become too large a share of the portfolio, investors often sell some of those gains and move the money elsewhere. That keeps risk from becoming overly concentrated.
Family offices haven’t been doing much of that.
Addepar said it isn’t seeing meaningful changes in inflows or outflows. Yet public equities have been allowed to grow to their largest portfolio weight in years.
We read that as a sign of comfort with equity exposure, not proof of aggressive stock buying.
There is an important difference.
Fresh buying tells us investors are actively adding risk at today’s prices. Allowing an allocation to rise tells us they see no urgent reason to reduce it.
After a major rally and persistent warnings about an AI bubble, that is still a fairly constructive signal.
And the money is concentrated exactly where you would expect
The most commonly owned stocks among the family offices weren’t obscure companies or defensive dividend names.
They were the biggest technology platforms in the market:
- Microsoft: owned by 77% of family offices
- Amazon: 76%
- Alphabet: 76%
- Apple: 70%
- Nvidia: 69%
The list says plenty about where conviction remains.
Family offices have access to private equity, venture funds, real estate, direct deals and investment opportunities unavailable to most individual investors. Yet some of their most widely held investments are the same public technology stocks sitting inside millions of retail portfolios.
That challenges the idea that sophisticated capital always needs a complicated investment vehicle.
It also reinforces how deeply the AI trade has worked its way into large portfolios.
Poirier specifically pointed to AI as a major driver of the public-equity exposure. Unlike many previous technology themes that began in venture capital before migrating into public markets, much of today’s AI boom is being expressed through giant listed companies with enormous balance sheets and immediate exposure to spending.
Microsoft, Amazon, Alphabet and Nvidia are not peripheral bets on AI.
They are financing, building or supplying much of the infrastructure behind it.
We think there are two messages for the broader market
The first is bullish.
Large pools of patient capital are still willing to carry substantial exposure to public equities despite elevated valuations, concentration concerns and repeated warnings that the AI trade has moved too far.
That creates an important source of underlying support for the market. If investors with decades-long horizons are comfortable letting equity allocations run higher rather than immediately taking profits, there is still institutional confidence behind the rally.
But there is another side investors shouldn’t ignore.
Some of the relative attractiveness of stocks is coming from problems elsewhere.
Private credit valuations are being marked down. Real estate has struggled. Venture portfolios are still working through investments made at much richer valuations earlier in the cycle.
Public equities may look increasingly attractive partly because they offer liquidity, transparent pricing and exposure to businesses that are still producing strong earnings growth.
That is different from saying stocks are cheap.
We don’t think they are.
Our read is that public markets are currently winning the competition for capital, especially when compared with parts of the private market where valuations and liquidity remain harder to assess.
The next test is what happens when markets stop doing the work for them
The second-quarter allocation shift was helped enormously by rising stock prices.
The cleaner signal will come when family offices actually have to make a decision.
If equities continue rising and these investors still refuse to rebalance meaningfully, their conviction becomes harder to dismiss. If stock allocations begin coming down, we will know the second-quarter increase was mostly a market-driven accident rather than a strategic change.
We are also watching three areas closely:
- Whether public-equity allocations remain near current levels in the third quarter
- Whether markdowns in private credit and other alternatives continue
- Whether changing interest rates make bonds competitive enough to pull capital away from stocks
Fixed income currently represents just 8% of family-office portfolios in the tracker. With the rate environment moving quickly, even a modest shift toward bonds could become meaningful.
For now, though, the message from these portfolios is fairly clear.
The ultra-wealthy aren’t abandoning private markets, and they aren’t blindly chasing stocks either.
They are simply allowing public equities — particularly the major AI and technology names — to occupy more of the portfolio.
We think that matters.
At a time when much of Wall Street is debating whether the AI rally has gone too far, some of the world’s most flexible pools of capital appear comfortable letting their winners keep running.
The question now is how long they remain comfortable doing it.
Explore More Stories in Markets
Disclaimer
Wall Street Access is an independent financial publisher. Wall Street Access is not a financial advisor. No company mentioned has compensated Wall Street Access for the preparation, publication or distribution of this article. This content is provided for informational and educational purposes only and is not investment advice or a recommendation to buy, sell or hold any security. Investing involves risk, including the possible loss of principal.
Prices, market capitalizations, financial figures and other market data are based on information available as of the date and time of publication and may change without notice. Information is drawn from public sources believed to be reliable but is not guaranteed to be complete or accurate. Opinions and expectations expressed are our own and may change as new information becomes available.
Readers should conduct their own due diligence and contact a licensed financial professional before making any investment decision. Past performance does not guarantee future results. Any material ownership interest or conflict of interest, where applicable, will be disclosed separately.
