Family office managers advising families on private equity often ask us whether the shift toward direct company investment rests on solid ground. This article sets out four reasons family offices have become a force in private equity: autonomy, long-term partnerships, flexibility and the chance to make an impact. It helps you weigh whether those advantages apply to your family's goals before recommending a larger private equity allocation.
We used AI tools to help gather research and speed up the first draft. That left more of our time for checking each figure against its original report and adding what we see in client conversations. A Masttro editor reviewed every claim, and members of our team read the article before it was published.
Key Takeaways
In recent years, family offices have become a potent force in the private equity space. Many growing companies have come to see family offices as a uniquely valuable source of funding. In turn, family officers are increasingly advising the families they serve to invest in companies as a means to long-term growth.
In recent years, family offices have become a potent force in the private equity space. Many growing companies have come to see family offices as a uniquely valuable source of funding. In turn, family officers are increasingly advising the families they serve to invest in companies as a means to long-term growth.
But is there a sound basis for this new trend in family office management? As it turns out, yes. Let’s talk about the benefits of private equity for family offices.
1. Autonomy
Unlike traditional funds, family offices do not have to balance the wishes of multiple unrelated investors. Instead, a family office is only bound by the needs of the family it serves. This makes it easier to tailor investment strategies for the mutual benefit of the family and the companies they invest in.
This autonomy also allows family offices to reduce fees and expenses. In the past, investing through funds has traditionally been subjected to the industry norm of 2% management and 20% performance fees—and even higher in cases of top-tier fund investments. However, recently, a decline in asset values and unprecedented volatility in financial markets have prompted a reevaluation of conventional investment strategies.
As a result, some affluent families have explored other alternatives, including:
- Direct investments that bypass funds
- Co-investment opportunities
- Club deals with other prosperous families in their circles
Such strategies aim to safeguard capital, control risk, and decrease fees and costs.
2. Long-Term Partnerships
Family offices are not limited by the strict exit timelines that most traditional funds must adhere to. A family office may choose to partner with a company for much longer periods—even indefinitely. This often aligns better with a company’s long-term plans for growth, making family offices an attractive source of funding.
These long-term partnerships can help foster deeper connections between a family office and the companies it invests in. This gives the family an opportunity to truly understand the company’s values, operations, and strategic goals, thereby ensuring alignment between the investor's interests and the company's mission. That alignment can make all the difference for a successful investment.
3. Flexibility
The autonomy of a family office allows flexibility for more than just their investment approach. They are also uniquely positioned to make diversified investments that cater to the evolving goals of the family. With the potential to invest in a variety of asset classes and industries, family offices can shape a robust and balanced portfolio, offering a level of diversification that may be difficult for conventional funds to match.
“With Masttro we have the tools to manage assets that are nontraditional, and that’s translated into an opportunity to provide a much broader service than investment management.”
Building an Effective Family Office Tech Stack
4. Making an Impact
Many family offices have priorities beyond just making more money. Some are also committed to making the world a better palace. While philanthropy has typically been the main tool for this, many families are discovering that impact investing can be just as effective—if not more so.
Instead of simply generating profits to donate later, impact investing aims to directly improve society by funding sustainable, socially conscious companies. Once again, the autonomy of a family office facilitates this approach. In a traditional fund, where investors often prioritize maximum returns, implementing such socially-minded strategies could prove challenging. In contrast, family offices, with their unique flexibility, can more easily integrate impact investing into their portfolio.
Family Offices: A New Powerhouse in Private Equity
Family offices are already reshaping the private equity landscape. As more families recognize the benefits of private equity, their influence on private equity will only grow, leading to a symbiotic relationship that promises mutual growth for family offices and businesses alike.
At Masttro, we are ready to empower your family office to navigate the complex private equity landscape more effectively.
Masttro is a cutting-edge wealth technology platform that provides an all-encompassing view of your wealth. The platform acts as a singular, reliable source of data, presenting a complete snapshot of your financial landscape to empower you with ultimate control and transparency. With Masttro, making informed, data-driven financial decisions is easier than ever.
Masttro includes a full suite of advanced features, such as:
- Sophisticated data aggregation
- In-depth analysis
- Real-time reports
…all protected by best-in-class cybersecurity infrastructure and stringent data security protocols.
Established in 2010 by a team of seasoned wealth experts, Masttro was designed to give family offices a better tool for visualizing and managing total net worth. Since then, Masttro has become a key player within the wealth tech industry. Our global client base includes hundreds of single-family offices, wealth advisors, professional services firms, and large financial institutions.
Want to learn how Masttro can provide you with the best tech setup for your family office practice? Schedule time with one of our wealth tech experts.
“We can fully visualize our portfolio and give full transparency to each family member. Additionally, we can now track our performance across alternative investments extremely well and accurately.”
“Finally, the most comprehensive and complete system available to manage all types of assets for a family.”
“We went from having no consolidation tool or data feeds to having both capabilities in a single platform - that also happens to track private equity investments perfectly.”
