Private Equity and Family Offices: A Symbiotic Relationship

The relationship between private equity firms and family offices has strengthened substantially in recent years, with both entities finding mutual benefits from increased collaboration and investment activity between them. This symbiotic dynamic is reshaping the private markets landscape.

Family Offices Increase PE Exposure

As family offices have become more sophisticated, allocations to private equity have risen dramatically to capitalize on the asset class's performance potential and diversification benefits.

• According to Campden Wealth's Global Family Office Report 2022, private equity is now the second-largest asset class for family offices at 22% of portfolios on average.

• Over 70% of family offices currently invest in private equity, up from just 20% in 2015.

• Driving this trend is private equity's track record of outperforming public markets, with global buyout funds returning 25.8% in 2021.

Source: Pitchbook

This increased capital flowing from family offices has become an invaluable source of funding for private equity.

PE Firms Court Family Office Capital

In turn, private equity firms have made concentrated efforts to cultivate relationships and investment partnerships with family offices.

• 88% of private equity firms now view family offices as a key source of future capital commitments, up from 64% in 2017, according to Campden's research.

• Major PE firms like Blackstone, KKR and Carlyle have built out dedicated teams and product offerings tailored specifically towards family office investors.

• This allows PE firms to diversify their LP base beyond institutional investors like pensions and endowments.

Family offices provide a stickier, less reactive source of capital versus institutional LPs which can be influenced by short-term factors.

Beyond Just Investing

Looking ahead, the family office and private equity firm relationship appears poised to deepen even further.

• 37% of family offices currently make direct investments alongside PE funds, while another 35% are considering adding direct deals.

• There is a rising appetite from family offices to leverage their investment skills and take more actively involved roles on company boards or in operations.

As private markets continue evolving, the symbiotic relationship between family capital stewards and private equity titans will become even more crucial for both parties.