The New Rules of Leverage for Family Offices

Single family offices (SFOs) are institutionalizing their balance sheets and adopting a more mature and deliberate approach to leverage.

More than three-quarters (76%) of SFOs are now borrowing to build liquidity, rather than at the point of need, according to Deutsche Bank Wealth Management’s 2025 Family Office Financing Report, and one in five increased leverage in the past year.

This marks a step change in sophistication since the global financial crisis (GFC), when many family offices were forced into distressed sales. Now, the best-prepared SFOs are building liquidity “war chests” using nontraditional assets as collateral, and tapping new lending channels to ensure that they can move quickly when volatility hits or assets come to market.

“Higher interest rates, the rebasing of commercial real estate valuations and volatility in cash flow to and from operating corporate interests mean our family offices are exploring a broader range of financing solutions,” says Adam Russ, Global Head of Wealth Management and Business Lending, Deutsche Bank Private Bank. 

“They have become increasingly sophisticated in pricing and maximizing the value of the recourse and disclosure they provide. This allows them to leverage private banks as their ‘relationship lenders’ quickly and attractively to explore financing on more specialist asset classes such as sports teams, art, wine or classic cars, as there is a growing opportunity to unlock hidden value,” he says.

Russ points to a client who took a multi-hundred-million-dollar facility against an art collection: “We had a client whose art collection was not leveraged for some time, but after growing in confidence, he has used it to generate liquidity for investing.” 

The value of these rare assets is driven by their scarcity, says Russ: “People simply ask the question, ‘If I’ve got something there, can I extract value?’”

The Family Office Financing Report reveals that many family offices now maintain credit lines ahead of use.

Arjun Nagarkatti, Head of US and Europe International at Deutsche Bank Private Bank, describes this as “building a liquidity war chest.”

“It can be positive when you need to acquire something. It can also be defensive. But put the facility in place, so that if you do need liquidity, you’ve got it,” he says.

Families who already carry relatively higher debt are turning to private credit to mitigate cash flow strains, as valuations swing across assets such as private equity and real estate. 

“When that downside volatility happens, you either rebase your agreements or you look at speaking to alternative lenders if you want to maintain control of secured assets,” says Russ. “That’s why we’ve seen such a growth in mezzanine financing and private credit.” 

Deutsche Bank’s research confirms this momentum: 83% of family offices said they would lend to third parties as an investment, including via club deals, with nearly half expecting returns above 10%. 

Some are taking this a step further with peer-to-peer lending, which can offer better control and alignment of interests than traditional credit markets.

“Family office to private individual lending is becoming a big thing,” says Russ. “Those with knowledge in a specific industry or asset class can approach such lending with a ‘lend to own’ mentality and move very quickly.”

Today, this investment discipline matters more than ever, as the capital requirements for certain asset classes have ballooned, particularly in sports, which is increasingly enticing SFOs. 

Take the British Premier League football club Tottenham Hotspur, for example. A family office acquired a 27% stake in 2000 for £22 million, but the club is now valued at £2.6 billion, according to Forbes. 

“When you look at the sums required then, the exponential rise is extraordinary,” says Nagarkatti.

Attitudes to borrowing are not universal, however, and regional variances exist. According to the Family Office Financing Report, Hong Kong-based SFOs felt most favorably toward leverage (around three quarters said leverage is a strategic or important topic), but more than half of German SFOs said leverage was not a consideration when investing, with the UK and Switzerland sitting somewhere in between. 

For many, the GFC still casts a long shadow. 

“Anyone who has been borrowing money since before the GFC has seen stress after stress in the last 20 years,” says Russ. “People are dramatically better prepared for the challenges we’ve had now than they were in 2008 and 2009, and leverage levels never got back up from then.”

Leverage serves a dual purpose: as defense when portfolios come under pressure, and as a tool to move quickly when rare assets come to market. 

As families expand across borders, the financial services that banks provide are increasingly aligned with the expectations of SFOs.

“They want banks to understand and help them with complexity, with size and with speed,” says Nagarkatti.

The principle, he says, is simple: “The better prepared you are, the better you can respond to whatever life throws at you.”

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