Being private matters

Compared to larger and more institutional investor groups, family offices and foundations are resolutely private, and so remain a widely un-reported segment of the investor community. Yet they are playing a more active role in the private equity landscape; they have been much less erratic than other investors during the financial crisis and provide a substantial proportion of new capital raised for the asset class.

So Montana Capital Partners (mcp) and PEI’s Research & Analytics team joined forces in October 2013 to run a survey to identify the unique strategies of this important but low-profile investor group.

The survey respondents were based in the larger family office hubs in Switzerland, the US, Germany and the UK. Here, family offices have been investing in the asset class for a longer time period and are considered to be among the most experienced investors in private equity.

The survey found that private equity comprises a larger proportion of the investment portfolios of family offices and foundations than of LPs generally.

Almost a third of survey respondents have an allocation to the asset class of greater than 20 percent and a fifth said they place between 16 and 20 percent of investible assets to private equity. Only 16 percent of family offices and foundations that were surveyed have an allocation of less than 5 percent.

By contrast, PEI’s Private Equity Investor Sentiment Survey, carried out in June 2013, revealed that 53 percent of LPs – excluding fund of funds – said their allocation to private equity comprised less than 10 percent of their portfolios. Data from PEI’s Research and Analytics further emphasises this point: the average target allocation for pension funds and insurance companies stands at 7.3 percent and 3.6 percent respectively.