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Family Offices’ Above-Average Allocations to Private Equity – August 2014

by Katie Edwards

  • 07 Aug 2014
  • PE

Despite being relatively small investors in the asset class, family offices make substantial commitments to private equity funds and allocate a notable proportion of their AUM to the asset class as part of their wider investment strategy. Preqin’s Investor Intelligence currently tracks 5,349 active investors in private equity, 7% of which are family offices. Single-family and multi-family structures are fairly evenly split, with single-family offices accounting for 49% and multi-family offices representing the remaining 51%. The number of family offices Preqin tracks continues to grow, with 16% more family offices appearing as active investors in the private equity asset class compared to the end of August 2013. 

Of the family offices tracked by Preqin, 51% are based in North America, 34% are based in Europe and a further 8% are based in Asia. The average target allocation to private equity for family offices is 27.0% of total assets, significantly higher than the average target allocation for all LP types, which stands at 19.8% of total assets under management. The average current allocation to private equity follows a similar pattern, which stands at 17.8% of total assets for all active LPs, whereas the average current allocation to private equity for family offices is about six percentage points higher at 23.6% of total assets. Unlike other investors that require approval from committees or shareholders, family offices generally uphold relative flexibility with their investment strategies, which in part explains the notable gap between the group’s average current and target allocation to private equity. 

When reviewing the type of private equity funds that family offices have an appetite for, Preqin’s Investor Intelligence online service reveals that buyout funds are the most attractive strategy for family offices, with 43% having previously invested in, or looking to invest in the fund type in the future. Venture capital vehicles are the second most favourable fund type among family offices (40%) followed by growth funds (32%). Distressed debt (19%), mezzanine (14%) and fund of funds vehicles (12%) also prove to be attractive to a proportion of family offices. It is apparent that although multi- and single-family offices make up a small proportion of LPs in the private equity asset class, they continue to allocate a significant amount of their total assets under management to the asset class. Over the next 12 months alone, 14% of active family offices will look to invest in new private equity funds, proving there to be a continued interest in the asset class.

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