Family offices are planning significant changes over the next two years, which include boost private equity allocations, additional focus on direct investments, and an increasing number adopting formal investment committees, a report shows. on Wednesday, 13 November 2024, the report was produced by US-based Bastiat Partners, an investment and merchant bank, and Brussels-based Kharis Capital, a private equity firm specialising in investments in the global consumer sector which has its local office in Gasperich. The study surveyed over 75 global family offices, who were polled between March and June 2024.

Private equity

The report found that approximately 40% of family offices plan to increase their allocations to private equity transactions over the next two years. This represents a significant shift compared to other asset classes, such as venture capital and growth equity, where only 18.6% of respondents indicated plans for increased allocations. Real estate and private credit are expected to see allocation increases of 14% and 16.3% respectively. The data highlights a clear preference for private equity as a preferred investment vehicle for family offices in the near future.

Networking

Networking was identified as a critical component of successful investment strategies among family offices. The survey revealed that 59.7% of respondents view networking with other family offices as essential to their investment approach. Additionally, 73.6% expressed a desire for more introductions, with particular interest noted in North America. These findings underscore the importance of building connections within the family office community to gain access to exclusive deal flows and investment opportunities.

Direct investments

Direct investments are gaining significant traction among family offices, with 50% of respondents planning to increase their exposure to such investments. This trend reflects a growing preference for greater control and bespoke investment opportunities, whether through independent deals or co-investments with sponsors. The shift towards direct investments is a notable departure from traditional fund-based models, offering family offices more autonomy in their investment decisions, the report pointed out.

Syndicate participation

The survey also indicated that more than 52% of family offices prefer to participate in syndicates with pre-agreed terms rather than taking the lead in transactions. This preference for syndicate participation suggests a more cautious approach, with family offices relying on the expertise of established sponsors to manage risk. However, 40% of respondents indicated they are open to both leading and participating in syndicates, reflecting a level of flexibility in seizing attractive investment opportunities when appropriate.

Deal flow

A key challenge identified in the survey is sourcing high-quality deal flow. Approximately 20% of family offices cited this as a significant concern, highlighting the difficulty of finding optimal investment opportunities in a competitive market. To overcome this challenge, family offices are increasingly looking to leverage their networks and employ more sophisticated sourcing strategies to identify attractive deals and secure access to exclusive opportunities.

Governance

Governance is becoming an increasingly important consideration for family offices. The survey found that 36.1% of family offices have implemented investment committees, while 18.1% have established boards of directors. Additionally, 22.2% use both structures to ensure effective decision-making. This trend is particularly evident in North America, where 54.5% of family offices utilise investment committees. The rise in formal governance structures reflects the growing need for robust oversight and strategic alignment in managing complex investment portfolios.