(HedgeCo.Net) Family offices are increasingly turning to liquid alternative investment strategies as a defensive response to a more volatile and geopolitically uncertain environment. According to a recent survey by BlackRock, 84 % of family offices identify geopolitical uncertainty as a significant challenge in their investment decision-making. Funds Society+1 The same survey shows that 68 % are focusing on increasing portfolio diversification and 47 % are increasing their use of sources of return such as illiquid alternatives, foreign equities, liquid alternatives and cash. Funds Society+1
Historically, liquid alternatives—investment strategies that deploy hedge-fund style techniques (such as long/short, global macro, managed futures) in more broadly accessible vehicles (mutual funds, ETFs, daily-liquid vehicles)—have been a niche set of strategies. But the rising interest reflects a structural shift: investors want flexible access to diversifying sources of return that are less correlated with traditional stocks and bonds. One family-office executive quoted in the coverage emphasized that “we simply don’t want to be caught using only the 60/40 stock/bond paradigm when that paradigm is breaking down”.
The logic is compelling: lingering inflation, shifting central-bank policy, surging China/US geopolitical tension, and rising regional conflicts have all increased the risk of sudden market dislocations. In that context, liquid alternative strategies offer two appeal factors: (1) the ability to hedge or profit in non-traditional environments (e.g., long/short, macro, tactical credit); and (2) more liquidity and transparency than the classic illiquid private-fund route.
However, the article cautions that increased access does not guarantee outcomes. Liquid alternatives still require strong manager selection, clear fee structures, and alignment of objectives. Some of these strategies may carry relatively high fees and complexity (even if less than traditional hedge funds) and can suffer from crowded positioning or lack of differentiation. Investors shifting into liquid alternatives must therefore remain disciplined about due diligence, monitoring, and cost/benefit trade-offs.
For family offices, the move into liquid alternatives marks a broader mindset shift: from “buy and hold large illiquid private assets for long time horizons” toward “maintain flexibility, maintain access, maintain diversification”. Given the survey data, the trend appears more than anecdotal—it may represent a broad re-allocation of capital in the alternative-asset ecosystem.
In summary: With macro and geopolitical uncertainty elevated, many family offices are pivoting toward liquid alternatives as a diversification and risk-management tool. While the interest is high, the long-term success of this shift will depend heavily on manager selection, fee discipline, and portfolio construction.