When the aggregate model lands near the middle of the range, the conversation with most clients shifts. The decision is not whether to be in equities. The decision is how the equity sleeve inside the portfolio is constructed.
One reference point that quietly informs a lot of the work we do is how single and multi-family offices typically approach the equity allocation. Their mandate is usually closer to a private client's than a super fund's, and the lessons travel well.
How much family offices typically hold in equities
The figure surprises people the first time they see it. Across the major family office surveys published over the last few years (Campden Wealth, UBS, Citi Private Bank), the average global allocation to public equities sits in the 25 to 35 per cent range, depending on the size of the office and how aggressive the mandate is.
Larger, longer-horizon offices skew toward the lower end. Smaller offices with more income needs sit closer to the upper end. Almost none of them are zero.
That is striking when you remember that these are the investors with the deepest possible access to private markets, real assets, hedge funds and direct deals. They could allocate to equities at zero if they wanted to. They do not.
Why they still hold equities
Five reasons keep coming up, in roughly this order of importance.
Liquidity. A public equity sleeve is the most liquid position in a portfolio outside cash. When a private opportunity surfaces, when a capital call lands, when a family wants to fund a project, the equity sleeve is the lever that gets pulled first. Without it, every other position becomes harder to manage.
Daily price discovery. Public markets mark to the truth every day. Private positions get valued quarterly at best, sometimes once a year. Holding a meaningful share of the portfolio in publicly priced assets keeps the family office honest about the real risk profile of the whole book.
Index efficiency for the beta sleeve. For exposure that is just compensation for taking market risk (the beta), nothing beats a low-cost passive index for cost, tax efficiency and simplicity. Most family offices use the passive core to do the heavy lifting on beta, then put the active risk budget elsewhere.
Tax flexibility. A public equity position can be trimmed at the exact moment that is useful for CGT timing. Private positions, especially the closed-end ones, do not give you that choice. Under the new Australian CGT rules from 1 July 2027, the value of being able to time gains has gone up, not down.
Dividend predictability. Australian equities in particular pay a yield that is meaningful, franked, and reasonably reliable across cycles. Even at a 3.1 per cent yield (below the long-run average of about 4.0 per cent), the franking credits add roughly another 1.3 per cent for a top-bracket investor. That income stream funds a meaningful share of household cash flow without selling a single share.
How they normally do it
Most family office equity sleeves look roughly like this. It is not a template, but the shape repeats across enough portfolios to be worth knowing.
The reason this matters today is that "Fairly Valued" at the aggregate level can hide a lot of dispersion underneath. Specific sleeves look more expensive than others. Quality looks more reasonable than the market overall. Mid caps have lagged the headline index. Dividend yield is structurally lower than the long-run average. Each of those creates either a problem or an opportunity inside the equity allocation, depending on how the sleeve is built.
What a fairly valued market changes
When the model is screaming "Overvalued" (the +1 to +2 range), the conversation tends to be about risk reduction. Trim, tilt defensive, raise cash. When it is "Undervalued" (the -1 to -2 range), the conversation is about deploying.
At "Fairly Valued," the work is more nuanced. Most clients should not be trying to time the market at this level. The honest answer is usually some version of: stay invested, but be deliberate about how the equity allocation is constructed. The construction is the lever.
- Quality bias rather than broad market for the active sleeve, given P/E is elevated against the long run.
- Income-oriented Australian exposure to capture the franking advantage, given the yield gap is roughly flat versus history.
- Avoid overweighting expensive themes that look like the dominant story but are sitting in the top decile of their own valuation history.
- Keep the dry-powder allocation real, not theoretical. Fairly valued markets eventually become cheap or expensive. Both moves reward investors who held usable cash for the transition.
The point of borrowing from family office practice
Most household portfolios do not have the scale to run a five-sleeve structure with active satellites and dry-powder buckets, but the principles travel down well. The point is not to copy the institution. It is to borrow the discipline. A clear sleeve structure, a written policy on what the equity allocation is supposed to do, and a deliberate view on whether the sleeve construction matches the current market reading.
If you would like to look at how your equity allocation sits against this kind of frame, that is a conversation we have most weeks. 15 minutes is enough to know whether it is worth a closer look.