Data room: Rise of the family office

New York-based online platform Palico’s latest PE Data Snapshot report shows that family offices account for 8 percent of the aggregate $4 trillion of private equity assets under management worldwide, a share twice as large as it was five years ago.

In the same period, family offices, which also include high net worth individuals, increased their average PE allocation in their investment portfolios to 29 percent, from 19 percent in 2010.

This, Palico says, makes the wealthy investors the highest allocators in PE and the second-most rapidly growing capital source for GPs. The second highest allocators to PE are endowments, with an average 13.6 percent allocation, up from 12.8 percent five years ago.

Sovereign wealth funds are the fastest growing source of PE capital, representing 16 percent of the aforementioned $4 trillion, up from 12 percent five years ago. But sovereign wealth funds have the capacity to invest directly themselves and make up only 3 percent of the entire PE investor base. Palico states they make up about 7 percent of accredited investors.

Banks and investment banks fell sharply in their share of aggregate PE capital, halving from 8 percent to 4 percent. Their allocation to PE also declined to two percent from 4.5 percent of their investment portfolio in the same period.

Public pension funds represent 26 per-cent of aggregate PE capital today, a decrease from 30 percent five years ago. However, their PE allocation remained consistent, at 6.3 percent today compared with 6.2 percent five years ago.

Similarly, private pension funds’ share dropped to 12 percent from 17 percent, while their PE allocation dropped only 0.6 percentage points to 5.1 percent.

According to Palico, some PE fund managers are looking for ways to appeal to non-accredited retail investors by hosting investor days, hiring in-house specialists and forming connections with family offices, and creating feeder funds for such investors, among others.