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UBS: Family offices to increase co-investment activity

Despite a drop in co-investing deals in 2016 due to execution challenges, global family offices continue to prefer direct investments, according to the UBS Global Family Office Report.

Global family offices plan to expand their co-investment efforts in the next year, driven by key pull factors like the opportunity to invest directly and gaining access to qualified assets, a study by UBS and Campden Wealth found.

Close to half of the 262 family offices who participated in the study intend to increase their co-investing activity. In contrast, over 40 percent said that they are planning to invest more in private equity funds.

Despite the participants’ own admission of a continuous interest in co-investing, their actual activity actually declined to 9.4 percent in 2017 from 15 percent in 2016. In their view, this drop in volumes mirrors the sentiment that ‘some things are easier said than done’. Family offices highlighted identifying attractive deals as the biggest impediment to co-investing, followed by issues relating to due diligence and aligning values and objectives with potential investment partners.

On average, participating family offices took part in 6.7 co-investment deals over the year, with over half of the transactions in the so-called fund-to-family nature, rather than family-to-family. In addition, a significant majority – close to 97 percent – of those who co-invest found their existing deals through their own personal networks of contacts

Co-investments, club and office-to-office deals accounted for 9 percent of family offices’ private equity holdings. Fund commitments still made up the lion’s share at 37.9 percent, followed by active management at 22.3 percent and passive shareholder at 18.9 percent. Early-stage venture capital took up 9.1 percent of the portfolio, while deals syndicated by investment banks came in last at 2.7 percent.

Meanwhile the study also revealed private equity held its ground as one of the leading asset classes among family offices, accounting for 20.3 percent of all investments managed by family offices in 2017. Cost of investment, opportunity to invest directly, diversification and liquidity were the main factors influencing family offices’ decision-making while investing in private equity,

UBS and Campden surveyed 262 family offices with average assets under management of $921 million for its report.