As their numbers and the assets they control have grown this decade, family offices have become increasingly important to the private equity sector, especially to managers of smaller funds. A survey of smaller private equity managers reported in the March issue of Preqin Ltd’s Private Equity Spotlight found that family offices represent 37% of limited partners (LPs) in funds of up to $100 million in size. That proportion drops to 27% for funds between $100 million and $200 million, and falls off to just 4% of investors in funds larger than $200 million.

Not surprisingly, 80% of fund managers surveyed consider family offices crucial or important to their fundraising activities in a difficult asset gathering environment. Moreover, managers believe that family offices are different from institutional investors. For one thing, family offices want more detailed information. For another, they tend to allocate smaller amounts to private equity, reflecting their aversion to risk and, in many cases, small size. The differences, the respondents said, must be heeded in approaching these investors.

However, the fund managers complained of an information vacuum regarding family offices as investors in private equity, with 61% saying available information is insufficient. Nearly 80% of respondents said they accessed family offices through contacts or use of networking. Ten percent said they use consultants, referrals or direct approaches, or go through banks’ private wealth management divisions to make contacts.

Private equity as an asset class has a receptive audience in family offices and high-net-worth investors because its long-term nature meets their asset allocation criteria. To improve relations between themselves and family offices, fund managers in the survey said they could offer greater transparency about their activities, and some said they could be more proactive in marketing their products to family offices.

Michael S. Fischer (msf7@columbia.edu) is a New York-based financial writer and editor and a frequent contributor to Wealth Manager.