Private equity makes up an average 21% of a family office portfolio, a higher proportion than any other asset class, according to a new study from Campden Wealth, with support from investment manager KKR.
Private equity’s position is likely to strengthen going forward as eight in 10 family offices in the study said they intended to maintain or increase their allocations to this asset class.
Fifty-one percent planned to increase co-investing, and 40% said they would increase direct investments in the future.
The study was based on data collected in 2016 from 242 family offices in North America, Europe, Asia/Pacific and emerging markets, representing family offices with an average $759 million in assets under management. Of these, 115 responded to questions specifically related to private equity. Six qualitative interviews with family office executives followed in April to clarify key private equity-related trends that emerged from the data.
Campden said family office executives who participated in qualitative interviews pointed to diversification benefits and the potential of higher returns as the key factors that attracted them to private equity.
According to recent research, many types of investors today consider private equity a core holding.
The Campden study found that allocations to private equity funds represented the highest proportion of the family office private equity portfolio in 2016, 34%, and among multiyear survey participants between 2015 and 2016, the allocation to funds increased from 31% to 41%.
In interviews, family office executives said the chief attractions of funds were diversification and consistent deal flow. They also highlighted the advantages of access to a skilled pool of investment professionals, which can appeal to family offices with insufficient resources.