What direction will family office investing take in the coming year? Nathan Sonnenberg, chief investment officer of Pitcairn, a family office serving ultra-high-net-worth families, shares three trends shaping family office investments: private investments, impact investing and AI.
Private investments
A trend that’s been going on for a while but continues to gain acceptance: the idea of more private investments at the expense of public investments. Families have been making private investments for a long time. We’re strongly advocating for a greater percentage of investments in the private markets, including private equity, as well as private real estate equity and debt. Specific areas of interest include storage, data centers, and multifamily homes. We are even starting to see opportunities in parts of the commercial office segment.
On the credit side of things, post the financial crisis of 2008-09, there has been a significant evolution of regulation that has negatively impacted the banking sector’s willingness and ability to lend money to private companies. The degree to which the private credit markets are playing a role replacing the banks and providing funding to companies continues to evolve at a rapid pace. We’re seeing interesting opportunities to take on additional illiquidity with the expectation of creating greater returns than are available in the public fixed-income markets. Private lenders do the specific, individual underwriting that ensures proper covenants and legal recourse should these loans default.
Private markets create opportunities, but there are also risks. The biggest challenge is finding the best investment firm with historical track records of delivering solid returns in the private markets. Today, there are more private equity firms than there are publicly traded stocks. As such, there is no guarantee that all investors in the private equity markets will earn 3% to 5% over the public equity market. Not everyone gets to win simply by playing. The ability to identify those who really have skill is critical. Also, in private equity, the fees are high, and the investment requires clients to lock up capital for the long term. Ultimately, the success of each investment will not be known for 10 to 12 years into the future.
Impact investing

More of our families continue to express interest in making investments that can generate reasonable returns while also having positive impact. This is a different mandate than selecting investments that have been put through multiple filters defined as environmental, social, and governance (ESG).
Some examples of impact investing include providing global water equity by investing in companies that provide safe water and sanitation solutions in underserved communities, or affordable housing made possible by companies that provide below-market loans that provide access and support new housing developments. Our clients are aiming for both financial returns and positive social impact.
Impact investing has its challenges, such as how to measure and define success. When we hire a manager to run an ESG portfolio, it’s easy to say, ‘I hired a large cap US manager with an ESG mandate, and my hope is that they will match or outperform the US stock market.’
Impact investing also tends to require taking on illiquidity beyond that of the public equity or debt markets. As such, gaining access to investments with ‘impact’ almost exclusively requires a private structure where the money is being raised for a specific outcome, one that typically will take many years to implement, such as improving sanitation in sub-Saharan Africa.
In advance of making any investment, we have to work with the manager to understand how we and the client should measure the impact: How one measures a particular type of impact is very subjective and much more challenging than measuring how daily liquid portfolios do vs. publicly available proxies. The challenge is defining outcomes that we can all agree upon and ultimately measure.

Artificial intelligence
AI has been around in many forms for years, but it was the accessibility through ChatGPT of the LLLMs (large language learning models) that really opened people’s eyes in terms of what the future potential for AI might be.
There’s not a conversation that goes by with our existing clients and even prospects without our being asked, What does all this AI stuff mean? What I believe they are really asking is, What does this mean with respect to my portfolio, and how are you at Pitcairn going to think about the impact, both positive and negative, in our portfolios? How are you going to apply AI to improve your processes and generate outcomes better than the current ones? They’re also asking, What does this mean broadly for society, and then specifically for industries and companies?
I don’t think anyone would disagree that over the next decade, AI is going to be disruptive and transformative. No one knows with certainty how. But we are paying attention to the first-order and second-order impacts. How might AI disrupt the way we invest going forward? Will it change the types of the solutions we have used for decades? My team is spending a ton of time thinking about this and various other impacts.
Ultimately, it’s my belief, to steal a quote from Bill Gates, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.”
This is how we’re viewing AI: Right now, there’s a lot of hype and hyperbole, but longer term, there will be massive changes for investments and for society.