Family Offices Shift Focus to Private Equity

Big Idea:

A recent survey by global investment firm KKR highlights a significant pivot among family offices towards private equity investments, driven by a search for stable, long-term returns.

Why It Matters:

Family offices are making a strategic pivot towards private equity, drawn by the promise of long-term, sustainable returns. This alignment with private markets fund managers on investment timelines further solidifies the trend. It reflects a cautious approach in a volatile market, emphasizing the importance of return on and return of capital.

Key Details:

• Family offices are now allocating 52% of their portfolios to alternative investments, a 2% increase since 2020.
• The growing preference for private equity over venture capital among family offices.
• This trend may reshape fundraising dynamics in the private markets, favoring established names and emerging managers with proven track records.

Dive Deeper:

The current fundraising environment in private markets is described as challenging, with the process now taking an average of 22 months, a substantial increase from the nine months seen during the COVID period. This has led family offices to be more selective, gravitating towards established, top-quartile brand names for growth and buyouts.

The Intrigue:

Despite the tough fundraising climate, emerging fund managers with a solid track record, even if brief, have opportunities. Notably, those with high-impact exits (returns of four to four and a half times investment) can attract attention from family offices.

The Bottom Line:

Despite a current preference for private equity, there are indications of long-term interest in venture capital from family offices. This interest is part of a broader trend of increasing allocations to the private equity bucket, which includes buyouts, growth stage investments, and venture capital, with some family offices moving into double-digit allocations to venture capital.