Family offices voting with their feet for PE

Private equity continues to play a large role in the portfolios of family offices and foundations; more than one-in-three has an allocation greater than 20%.

Private equity accounts for a giant slice of family office exposure, according to research conducted by PEI in collaboration with secondaries specialist Montana Capital Partners.

More than one-in-three (35 percent) of family offices surveyed by PEI have an allocation to private equity of more than 20 percent of their entire portfolio. These allocations are only likely to grow, according to the research; almost nine out of 10 respondents kept their allocation to the asset class constant or increased it over the past year, while 43 percent plan to increase it further from the current level.

“What is most notable is the size of the allocations and the fact that so many family offices are looking to increase their exposure,” Marco Wulff, co-founder and partner of Montana, told Private Equity International. “Why are they doing this? Because it has consistently outperformed other asset classes and they see pressure on returns elsewhere in their portfolios.”

Family offices are much freer to shape their investment strategies in an unconstrained manner, said Christian Diller, also a partner and co-founder at Montana. “Whereas an insurance company has to keep an eye on allocations, an eye on its liabilities and an eye on regulatory constraints, a family office just looks at risk-return profiles and so is a little bit nimbler.”

Half of the family offices surveyed do not invest in secondaries, according to the survey, while more than one-in-three invest in secondaries funds as part of their private equity programme. A smaller proportion (18 percent) buys secondary fund stakes and a smaller proportion still (12 percent) is considering selling positions in the secondaries market.

Those investors that are actively accessing the secondaries market show a preference for small secondaries transactions, direct secondaries and GP-led transactions over the next 12 months. “According to a family office in Switzerland it is much easier to find an angle and attractive discounts in small secondaries,” the report said.