European family offices plan greater PE deployment

European family offices are expected to raise their private equity allocations at a faster rate than their North American counterparts, according to new research.

The average family office will deploy $68 million into private equity this year and $88 million next year, Campden Wealth’s Private Equity Investing and Co-Investment Activity by Family Offices found. This is up from $51 million in 2017.

The average European family office is expected to deploy $86 million next year, a 65 percent increase from 2017. Their North American counterparts will deploy more on a dollar basis – $102 million – a 46 percent rise.

While the average private equity percentage return for 2018 is expected to stay level with the 14 percent recorded last year, it is expected to climb to 18 percent in 2019. Almost 40 percent of respondents said private equity had outperformed their expectations in the last 12 months, with an additional 53 percent having their expectations met.

“The returns that private equity will produce, while they might be muted based on past performance, I still believe that they will outperform public markets,” an unnamed family office executive in North America said in the report.

Just 67 percent of family offices pay fee and carry to their private equity managers. An additional 24 percent pay an annual management fee only and 8 percent pay carry instead.

Growth equity is the most popular strategy, attracting 53 percent of the average private equity portfolio. Leveraged buyouts make up 28 percent of family office portfolios, with the remainder comprising venture capital.

The Campden Wealth report was produced in partnership with KKR. It surveyed 76 executives at single and multi-family offices, of which 33 percent were in Europe, 32 percent in North America, 22 percent in Asia-Pacific, 12 percent in the Middle East and 1 percent in Africa.