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Researchers from Oxford University found there's a lack of support for carers.
The charity Family Rights Group carried out the study with Oxford University's Centre for Family Law and Policy.
They say there's a "major lack of support" for "kinship carers".
The organisation says there are estimated to be 250,000 children living with family or friends in situations where they are unable to live with either of their parents.
It found almost 44% of those surveyed said they had received no practical help from their local authority.
The charity said 95% identified at least one form of support they had needed but not received and more than 70% rated the support they had received from their local authority as poor or very poor.
Its research included a survey of more than 490 carers raising more than 750 children; 95 in-depth interviews; an analysis of Government data and a Freedom of Information request to local authorities.
It showed 20% of children being cared for by a friend or family member had first been placed in unrelated foster care before eventually being moved to a kinship arrangement.
The group said interviews with carers showed more than a third (38%) of children living with family and friends carers suffer emotional and behavioural problems and many have learning and physical disabilities.
Family Rights Group chief executive Cathy Ashley said the system cannot cope at the moment with increasing numbers of children going into care.
She said this was leading to children having multiple moves, which has a big impact on them.
"Our research shows many local authorities are not fully exploring and supporting opportunities to place children with family and friends, who can offer the security, continuity and love they so desperately need,'' she said.
"These people are relieving a great deal of pressure from the state care system and acting in the best interests of incredibly vulnerable children, benefiting the rest of society. They deserve better.
"The amount and type of support carers receive from local authorities appears to bear little or no relationship to the child's or carer's needs, which is absolutely shocking.''