1. A shift toward professionalisation

The journey of family offices from wealth custodians to next-generation wealth creators is rooted in their commitment to professionalise operations. Today, over 70% of family offices in India recognise the need for a governance-driven, process-oriented approach to wealth management.1 This shift is not just about enhancing efficiency but also about aligning with modern investment philosophies. Key drivers such as succession planning, impact investing, and the involvement of millennials and Generation Z are pushing family-run businesses to adopt innovative strategies. The infusion of professional expertise ensures that family offices remain resilient in an increasingly complex financial environment.

2. From preservation to creation

Traditionally, family offices were focused on safeguarding wealth through prudent asset allocation, tax planning, and financial management. However, as India witnesses a surge in entrepreneurial ventures and liquidity events, family offices are transitioning from wealth preservation to wealth creation. This transition is particularly evident in scenarios where families have experienced liquidity events, such as the sale of a business. The resulting capital surplus has driven the establishment of family offices with a mandate to invest strategically in growth opportunities. Many now view these entities as engines of wealth creation, emphasising long-term growth while maintaining an optimal balance with wealth preservation.

3.Growing importance of Alternative Investment Funds (AIFs)

The growth of global wealth has significantly increased the number of family offices, which currently stands at approximately 10,500 worldwide. In India, the number of family offices is estimated at over 300, reflecting a growing shift toward personalised and professional wealth management to safeguard and grow family assets across generations. This trend is poised for robust growth, with the AUM of mid to large-sized family offices projected to grow at a CAGR of at least 14% over the next three years, potentially increasing by 1.5 times during this period. Further, AIFs are set to play a pivotal role in this evolving ecosystem, offering family offices a strategic gateway to private markets, enabling them to diversify portfolios and explore high-potential areas like venture capital, venture debt, hedge funds, and private equity. Globally, family offices are allocating a significant proportion of their portfolios to AIFs, leveraging their long-term perspective and "patient capital." While Indian family offices currently dedicate a smaller share of their portfolios to AIFs compared to their global counterparts, this is rapidly changing. Many prominent Indian family offices are eyeing an increase in AIF allocations by up to 5%, recognising their potential to enhance portfolio performance and mitigate risks associated with traditional investment products.

4. The growing appetite for global investments

Indian family offices are increasingly seeking global exposure to diversify their portfolios and enhance long-term wealth creation. Many are leveraging AIFs as a strategic avenue to access international markets, co-investment opportunities, and private market assets. These funds provide a structured approach to explore venture capital, private equity, and global startup ecosystems. AIFs also offer family offices the ability to participate in professionally managed investments while benefiting from international best practices. By aligning with venture capital-focused AIFs and engaging in co-investments, family offices can access unique opportunities, gain global insights, and refine their investment strategies, addressing their growing need for diversification and innovation.

5. Evolving objectives and generational shifts

The objectives of family offices are evolving, driven by generational shifts and changing market dynamics. Younger leaders are emphasising investments that align with values like sustainability and impact investing and this shift is evident in increased allocations to AIFs. Initially, VC-focused AIFs served as a learning ground, helping them navigate entrepreneurial ventures but with growing expertise, many family offices are now transitioning their investment styles and opting for direct investments, supported by professional teams. As India’s financial ecosystem matures, family offices are shaping the alternate investment landscape, blending tradition with innovation and contributing to economic growth and sustainability.

Going into 2025, family offices are no longer just custodians of wealth; they are architects of legacies, driving the transformation of India’s alternate investment space with a vision that bridges tradition and innovation.