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Single-family offices more interested in alternatives, PE than multi-family offices: study

Why this is important:

  • FOs are increasingly bigger players in the PE space
  • FOs are willing to take greater risks and wait longer for pay-offs

Single family offices are allocating about 60 percent of their assets to alternatives, compared to 44 percent for multi-family offices, according to a study released last month by Family Wealth Report, sponsored by FundCount.

Overall, the study, examining 44 family offices worldwide, mostly in North America, found an average 53 percent exposure to alternatives. Private equity and hedge funds accounted for 19 percent of that, dwarfed by direct investments at 33 percent. 1 percent were invested in cryptocurrencies/coin IPOs.

Single-family offices appear to slightly prefer private equity and hedge funds. SFOs allocated about 21 percent of their assets to private equity or hedge funds, while multi-family offices allocated 17 percent.

Still, both SFOs and MFOs dedicated more to direct investments, with SFOs allocating 38 percent and MFOs 27 percent.

The Global Family Office Report 2018, produced last year by UBS and Campden Wealth, had a larger sample size and found that family offices overall had 46 percent of their assets allocated to alternatives.

That report also found that private equity accounted for 22 percent of the average family office portfolio in 2018. Eighty percent of those investments either met or exceeded family offices’ expectations. Family office allocations to private equity funds went up from 7 percent in 2017 to 9.8 percent in 2018.

“I think we’ll be staying in private equity — I think that’s where we see the most growth,” said the CEO of one multi-family office in the UBS/Campden Wealth report.

The Family Wealth Report study also focused on problems with data-management in family offices overall, pointing toward a lack of sophistication in the types of technology used as well as generally small staffs.

“Family offices are wasting huge chunks of the working week on manual workarounds as they struggle along with generic software for accounting and investment analysis,” wrote Wendy Spires, head of research for ClearView Financial Media, who owns Family Wealth Report.

Action Item: Check out the Family Wealth Report study, “Family Office Focus: Efficiency in Accounting and Investment Analysis,” here.

Check out the UBS/Campden Wealth report from last year here.