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Highlight of the week
By late 2025, the familiar cycle of market anticipation and surprise returned, yet again catching even the most seasoned stewards of capital between caution and urgency. The Federal Reserve’s decision to begin cutting rates, invoking the now-common theme of “uncertainty” has left the investing terrain recontoured. For family offices, whose purview is not merely chasing quarterly return but preserving legacy through cycles, the question is stark: when the yield from traditional sources is subdued by policy, where does one turn?
The answer is not found in nostalgia for the past, but in clear recognition of shifting risk and opportunity. Private credit, once an adjacent field, is now, for many, a central allocation. Reports show allocations continue to climb, as families seek the yield premium and downside protection this space is reputed to offer.
The story is similar in private real estate and infrastructure. Near-record low borrowing costs and the promise of steady income have made these assets attractive. Roughly half of families now invest directly in real estate, finding both cash flow and, in some circumstances, a hedge against inflation. The appetite for direct investments and secondaries grows not from fashion but from experience: those who can bear illiquidity and exercise discipline in entry and exit often secure more attractive risk-reward profiles. Meanwhile, alternatives—spanning hedge funds, venture, digital assets, and thematic allocations—remain vital. Not out of an urge for novelty, but as a means of accessing differentiated returns in a world where traditional correlations are too often disrupted.
These shifts are not without cost. Illiquidity becomes a risk under stress. Complexity rises, governance must be strengthened, and prudent families are keenly aware of the potential for regret masked by recent successes. Each allocation now demands not only due diligence, but a sustained willingness to question whether the returns still justify the constraints imposed.
The changing rate environment restores attention to liquid markets. Bond positions are growing, now comprising about 11% of family portfolios, with duration extending as rates fall. Fully 72% of family offices now report average bond duration beyond three years—clear evidence that many see room for capital appreciation and stable yield in well-chosen credits. The favored approach is to hold the middle of the curve, avoiding both the risk of ultra-long exposure and the meager reward of the short end. High-yield bonds, especially in Europe, remain popular, but spreads are tight; here, manager selection counts more than sector or region. Municipal bonds and preferreds, often overlooked, see renewed interest for their resilience and moderate but stable yield.
None of this is static. If there is one lesson impressed upon us by each market cycle, it is the necessity of balance: between seeking yield and maintaining liquidity, between confidence in process and openness to revision. Family offices, blessed with patient capital, can avoid forced decisions, but not perpetual stasis. The risk isn’t just in backing the wrong thesis—but also in waiting too long to adapt to the new one.
Yet recent enthusiasm breeds its own risks. In this cycle, there is growing concern at the pace and interconnectedness of private market valuations, especially within artificial intelligence. Many technology businesses are investing in each other, driving up appraisals and, in some cases, detaching price from reality (e.g. NVIDIA investing into OpenAI, who in turn is investing into Oracle that uses majority NVIDIA chips). This circular reinforcement can create what is a bubble of both technical complexity and valuation. If one segment stumbles, the chain reaction has the potential to cascade through the network, testing every weak link. In private credit, this raises the stakes: illiquidity here is not just a cost—it is a source of systemic risk.
Patience, then, is not simply a catchphrase. Now may be the time to cushion portfolios with assets resilient to hype and avoid the exuberance clustering around the latest “transformative” sectors. Maintaining a disciplined liquidity buffer—resisting the urge to deploy every last dollar—remains an act of prudence. History is replete with structural shifts only obvious in hindsight; enduring capital does not win by prescience, but by surviving the periods when others stray from discipline.
The virtue is not certainty, but readiness: to measure opportunity with skepticism, to prize optionality as highly as headline returns, and to recognize that markets, for all their data and analytics, remain governed by cycles of fear and greed. “Nobody knows” may be an imperfect mantra, but for the families who intend to measure success in decades, not quarters, it is steadying. As the cycle turns, those who adapt thoughtfully—balancing yield with caution, innovation with liquidity—will be best positioned for whatever chapter comes next.
U.S. Market Updates
The U.S. government shutdown has limited and slowed down many statistical releases. Before the government shutdown, the economy was growing above trend, at 3.8% annualised GDP growth pace in Q2, supported by renewed acceleration in consumer spending. The growth rate seemed to have sustained early in Q3, based on strong growth in retail sales in both July and August, +0.6% m-o-m in each month.
US CPI inflation in the delayed September report just released showed headline inflation up 3.0% y-o-y from 2.9% y-o-y in August with the core CPI up 3.0% y-o-y in September (August, 3.1% y-o-y). The September inflation readings came in lower than expected. The Federal Reserve meets this week to potentially cut the Funds rate by 25bps to 4.00%. Softer labor market conditions are the main reason for the Fed to cut the Funds rate, but a still elevated inflation rate implies little opportunity to cut the Funds rate much more beyond 25bps this year.
However, Goldman Sachs’ Jan Hatzius warned that U.S. GDP estimates showing 3.8% growth in Q2 and 3.3% in Q3 may be overstated, owing to missing data from the government shutdown and weakening labor trends. Key business surveys for manufacturing and services have dropped below the neutral 50-mark, consistent with stagnating or contracting employment. Goldman’s own labor market tracker, aggregating indicators like unemployment and job openings, has fallen to levels last seen in 2016 and continues to decline. Hatzius notes that household survey responses on the jobs outlook are now gloomier than at any time except during historical recessions, with a record share expecting unemployment to rise.
Key business surveys for manufacturing and services have dropped below the neutral 50-mark, consistent with stagnating or contracting employment. Goldman’s own labor market tracker, aggregating indicators like unemployment and job openings, has fallen to levels last seen in 2016 and continues to decline. Hatzius notes that household survey responses on the jobs outlook are now gloomier than at any time except during historical recessions, with a record share expecting unemployment to rise.
This labor market weakness, he argues, casts doubt on the strong GDP growth signaled by preliminary estimates, as real-time employment indicators often provide more reliable signals about underlying economic momentum.
Highlight Report of the Month
The Family Office Playbook: A guide for legacy builders is a comprehensive guide published in October 2025 by Bloomberg, the HKSAR Financial Services and Treasury Bureau (FSTB), and Invest Hong Kong (InvestHK). It outlines key strategies and trends for multi-generational wealth preservation and growth, with a strong focus on adaptability, new technology, and responsible stewardship.
The playbook provides practical guidance and case studies on the operational aspects of running a successful family office.
1. Establishment & Design:
Structure: Offices are typically single-family (one family's assets) or multi-family (managing wealth for multiple families). The report profiles NF Trinity as an institutionalized single-family office and Landmark Family Office (LFO) as a boutique multi-family office that caps its client base at 30 families to ensure personalized service.
Governance: As families transition across generations (e.g., from siblings to cousins), formal corporate governance becomes crucial to separate business from family matters and ensure harmony, as highlighted by Dr. Aron Harilela.
2. People & Talent:
Institutionalization: A professional, institutionalized structure is key to attracting and retaining top-tier talent from global firms. NF Trinity's team of over 40 professionals is a testament to this.
Culture & Incentives: A collaborative, non-competitive culture is vital. Aligning incentives through performance-linked rewards and even small shareholdings fosters long-term commitment.
Hiring: The hiring process is patient and meticulous, focusing on both technical skill and cultural fit to ensure high retention.
3. Asset Management & Investment:
Philosophy: The primary goal for most is long-term capital preservation, followed by steady, risk-adjusted growth. NF Trinity targets absolute returns, while LFO tailors portfolios to individual client risk profiles.
Diversification: Global diversification across asset classes and geographies is a core principle to avoid home bias and enhance resilience.
Alternative Investments: There is a strong and growing appetite for alternatives. A 2024 UBS report indicates APAC family offices plan to increase allocations in:
Private Equity: 24% (direct) and 32% (funds)
Private Debt: 28%
Hedge Funds: 31%
Research: Advanced family offices like NF Trinity integrate fundamental analysis with quantitative methods, using an in-house data science team to analyze alternative data (e.g., scraping pricing data from luxury brand websites).
4. Technology:
Infrastructure: Sophisticated family offices use institutional-grade technology, such as Bloomberg Professional Services, for research, risk management, and reporting. LFO provides clients with a personalized online portal for consolidated asset viewing.
AI and Big Data: AI is being explored as a tool to enhance research efficiency, but human oversight in final decision-making remains critical.
Cybersecurity: With growing threats, robust cybersecurity is a top priority. This includes simulated attacks, strict data protection policies, and adherence to regulatory standards for licensed entities like LFO.
5. Philanthropy & Legacy:
Growing Importance: Philanthropy is increasingly central to a family's vision, driven by the next generation's desire to create a positive impact.
Sustainable Investing: According to a UBS survey, 52% of APAC family offices engage in sustainable investing, with this portfolio share expected to nearly double from 13% to 24% in the next five years.
Approach: Philanthropy can be deeply personal (the Harilela family's focus on education) or structured and facilitated through expert consultants (LFO's approach). The focus is on measuring real-world impact, often through direct engagement with grassroots organizations.
Readings of the week:
Launch of The Family Office Playbook and the First Anniversary of the Hong Kong Family Office Nexus
Financial Services and the Treasury Bureau: Launch of The Family Office Playbook and the First Anniversary of the Hong Kong Family Office Nexus
The Family Office Playbook: A guide for legacy builders
The Family Office Playbook: A guide for legacy builders | Insights | Bloomberg Professional Services
This is the worst the jobs market has looked (outside of a recession) in 50 years, says Goldman Sachs
Stagnant jobs market may weigh on optimistic GDP figures, warns Goldman Sachs | Fortune