When it comes to family offices, a tailored approach may pay dividends

Asia’s burgeoning base of ultra-high-net-worth families is creating an increasingly sophisticated pool of potential investors for private equity to pursue.

As Private Equity International explored in its recent miniseries looking at this growing investor set, appetites for private markets are on the rise. Accessing this capital, however, isn’t entirely straightforward.

In a time of market turbulence, these investors are becoming more selective, and the slower fundraising environment means the bar for new GP relationships has been raised. “We have a lot more time now to get to know managers, due diligence them and grow that relationship,” says Audrey The, managing director at LP advisory Cambridge Associates. This means family investors are putting more scrutiny on manager track records, ability to offer co-investments and transparency, among other things.

What’s more, family offices’ tastes can vary wildly depending on their wealth base, investment appetite and goals. Some prefer to invest in the same sector as their entrepreneurial backgrounds, confident that the synergy between portfolio companies and their expertise can yield sizeable returns; others are instead seeking to diversify their existing portfolios across various geographies and sectors, whether through disruptive ventures or PE funds.

These requirements, combined with the individual peculiarities of this vast LP community, may require a tailored approach when fundraising. “Every single family office is different; each one is a unique conversation,” Vincent Ng, a partner at Atlantic-Pacific Capital, told us last month. GPs that take the time to understand each family’s needs and wants, and focus their fundraising efforts accordingly, may find investors more receptive.

Such a dynamic could benefit two ends of the GP spectrum in particular: firms with the scale and resources necessary to source, build and maintain a vast number of LP relationships, each with unique preferences; and more nimble managers with a niche focus and the flexibility to accept smaller cheques.

There’s capital to be tapped: according to the Asia-Pacific Family Office Report 2022 from Campden Wealth and Raffles Family Office, the average APAC family office has $592 million of assets under management, while their total estimated AUM is $45 billion. Of these, 57 percent are planning to increase their allocations to PE – 10 percent higher than the global average; as we noted this week, some of these allocations can reach 30 to 40 percent.

With many institutional investors busy navigating the denominator effect and other headwinds, GPs are looking further afield for new sources of capital. Managers with the means and wherewithal to thoughtfully curate their family office targets and approaches will have the greatest success in these efforts.