“Family offices were quick to acknowledge the extent to which asset class risk premia had increased,” in the wake of the pandemic, Jean-Damien Marie and Andre Portelli, co-heads of investments at Barclays Plc’s private bank, said in a written reply to questions. “They have been active in both liquid and private credit.”

Family offices are loosely regulated, privately owned companies that manage money for the wealthy. Some of the world’s richest people, such as Alphabet Inc. Chairman Eric Schmidt, Italy’s Ferrero clan and Hong Kong telecommunications tycoon Li Ka-shing, have highly sophisticated investing operations more commonly seen with institutional investors.

Those lending privately often focus on real estate, with property developers turning to family offices for extra flexibility and faster access to cash than with most banks. In return, family offices typically get the security of an asset-backed loan that provides consistent cash flow from interest payments.

Like other lenders, they can also take control of the asset if the borrower defaults on a loan, and a minority of wealthy families in this scenario have then kept homes they’ve financed for personal use, said Paul Welch, the founder of largemortgageloans.com.

“The first question for some families when they lend is: Do we want to own the asset?” he said.

Wealthy investors active in private debt include former Los Angeles Dodgers owner Frank McCourt and British billionaires Simon and David Reuben, who finalized a private loan in February for the Apthorp, an apartment building on New York’s Upper West Side.

For now, rich families lending privately are cautiously opportunistic.

“We’re still looking to lend and we’ve got the internal family capital available to do so,” said Avamore Capital co-founder Michael Dean, who helps to fund the U.K. lender through his family’s investment firm. But “we’re not going to have the same degree of flexibility as we would usually.”

--With assistance from Marianna Aragao and Kelsey Butler.

This article was provided by Bloomberg News.

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