Family Offices Investing in Private Equity – September 2013

by Joanna Nye

  • 03 Sep 2013
  • PE

Although relatively small investors in the asset class, family offices increasingly continue to include investments in private equity funds as part of their overall investment strategies. Preqin’s Investor Intelligence currently tracks 5,187 active investors in private equity, 6.5% of which are family offices. Of these, there is a fairly even split between single-family and multi-family structures, with single-family offices accounting for 51% of investors, and multi-family offices accounting for the remaining 49%. The number of family offices tracked by Preqin continues to grow, with 29% more family offices appearing as active investors in private equity at the end of August 2013 compared to at the end of January 2013.

Of the family offices tracked by Preqin, 50% are based in North America. A significant proportion of family offices (39%) are based in Europe, with a further 6% based in Asia. The average target allocation to private equity for family offices is 29% of total assets, significantly higher than the average target allocation for all LP types, which stands at 18.9% of total assets. A similar situation can be seen with LPs’ average current allocation to private equity, which also stands at 18.9% of total assets, whereas the average current allocation to private equity for family offices is 25.8% of total assets.

In looking at the type of private equity funds that family offices have an appetite for, buyout funds are attracting the most interest, with 43% of family offices having previously invested in, or looking to invest in, the fund type. This is closely followed by venture vehicles (40%) and growth funds (33%), which are both attractive fund types for a significant proportion of family offices. Other private equity fund types that family offices have an appetite for include distressed debt (20%), mezzanine (15%), funds of funds (12%) and timber and natural resources vehicles (8%).

It is evident that although they make up a relatively small portion of all investors in private equity, family offices continue to allocate a significant proportion of their assets under management to the asset class. This looks likely to continue, with 28% of family offices looking to make new private equity fund commitments over the coming year. Almost half of these (47%) will be looking to make new fund commitments in the immediate future, with a further 37% looking to make new commitments on an opportunistic basis going forward.

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