Family office interest in private equity funds grows

With 45 per cent to family offices saying that private equity allocations have increased during the last 12 months, 33 per cent also expect to increase that activity in the coming year.

Findings produced by Montana Capital Partners and PEI, as part of the duo’s second Annual Family Office and Foundation Private Equity Survey, showed that only 13 per cent decreased allocations.

As private institutions that manage the assets of either one or a small number of wealthy families, family offices have a variety of options when it comes to investing funds: ranging from direct angel investments to developing blue chip stock portfolios.

Alongside a trend whereby investors in private equity have narrowed the amount of fund managers they are working with, the survey suggested that family offices remain open to new relationships.

Family offices are also increasing exposure to co-investments alongside fund managers, with only 20 per cent identifying a decision to avoid these kinds of deals.

Montanta Capital Partners partner and co-founder Chrisitan Diller stated that family offices and foundations play an “ever more active role” in the private equity scene.

“As banks and insurers have stepped away from the asset class – primarily for regulatory reasons – family offices have proven to be a stable investor group and have evolved into major providers of new capital to private equity funds,” he added. “In addition, their often entrepreneurial DNA means they have a natural affinity with the asset class.”

The two most popular private equity strategies revealed by family offices are mid-market private equity and distressed/turnaround investment. Large buyouts, however, are least favoured alongside the consumer goods and healthcare sectors.

“The secondary market continues to offer great investment opportunities in specific areas with many benefits for investors due to the shorter holding periods and lower risks,” Montana Capital Partners co-founder Marco Wulff said. “On the other hand the active market also offers potential sellers new opportunities in managing their portfolio. This effect is especially pronounced in small and complex transactions.”

A total of 64 family offices, multi-family offices, foundations and endowments were questioned for the survey. In excess of 50 per cent of those interviewed manage assets of $1bn or more.

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