The world of family offices according to Deutsche Bank: “war chests” and leverage

In recent years, Family Offices have increased their exposure to private markets, making the asset base less liquid and seeking new ways to free up liquidity.

The first edition of Family Office Financing Report 2025 by Deutsche Bank Wealth Management has recently been published. It examines the views and practices of single family offices on financing — from the use of leverage in investment strategies to pledging luxury assets as collateral. The report was compiled from the views of 209 family offices worldwide, including, among others, clients of Deutsche Bank, interviewed between 9 May and 14 July 2025. For the record, around 35% of respondents were responsible for portfolios with assets exceeding US$1 billion, with a further 27% in the US$250 million to US$1 billion range.

The study by Deutsche Bank Wealth Management highlighted several points that are little known to professionals working close to clients (financial advisers, network banks, insurance advisers, retail banks). First of all, family offices often build credit lines to seize opportunities and manage risk in a context of economic uncertainty, which remains elevated in many parts of the world. On this front, family offices appear to be preparing better than in previous cycles. In many cases, this means arranging credit lines well in advance of their actual use, secured against less liquid assets. This more "institutional" approach makes it possible to avoid over-allocating to cash, proactively rebalance leverage within the portfolio and build a "war chest" for opportunistic investments. The traditional use of leverage to boost returns nevertheless remains an important practice globally, even if in some regions the appetite for debt is constrained by cultural or macroeconomic factors.

Family offices around the world see leverage as an important tool and use it for a variety of purposes. 61% of respondents said it is a strategic topic "discussed by the investment committee and directly affecting risk and return objectives" or "an important topic for risk and positioning." For some, managing the appetite for and exposure to leverage is an essential part of the job. In fact, 76% of respondents said borrowing to increase liquidity was very important or "useful" when making risk-aware investment decisions.

By building "war chests", family offices are preparing to rebalance and manage their leverage when certain asset prices fall, the report continues. This also allows them to seize potential opportunities in distressed assets that may arise, while at the same time enabling them to support their businesses if other credit lines come under pressure. It could also help them weather any short-term volatility, whether economic or geopolitical. Many family offices are committed to holding majority stakes in operating companies, both listed and unlisted. With rising trade barriers and inflation globally, they have often been forced to inject more liquidity into their companies.

As for the composition of investment portfolios, illiquid assets are a key component used by Family Offices and are increasingly being used as leverage. In recent years, family offices have increased their exposure to private markets, making the asset base more illiquid and looking for new ways to release liquidity. Thanks to their long-term decision-making horizon, they can act as “contrarian” investors, increasing exposure when others are more cautious and seeing illiquid assets as an opportunity in times of market turbulence.

Structured finance is a key enabler for certain transactions, even for the largest and most liquid family offices. They appreciate the speed and certainty of execution that come from working with a single institution rather than a syndicate, as well as the partnership in due diligence required in the financing process. This is especially true when entering new markets or sectors. As they have grown in scale and sophistication, family offices have become more competitive in pursuing the best opportunities, and the ability to rely on a fast and flexible financial partner can be decisive given the extremely rapid execution times of deals.

Finally, most family offices are active in private credit and expect high returns. Many family offices lend capital directly or through private credit funds. Most of them expect returns of 10% or more. More and more often, they choose to invest in private credit funds not only because of the strength of the governance and due diligence processes, but also strategically, to build relationships and gain access to co-investment opportunities.