Single-Family Offices Warm Up to Private Equity

The secretive world of single-family offices has become a more meaningful source of capital for private equity as traditional LPs get cold feet.

Apparently these wealthy family money managers are eager to get more involved with the asset class.

A survey of 139 single-family offices from Grant Thornton found that 86% of those that already invest in private equity want to increase their commitments over the next three years. Equally important is that nearly a quarter of those that don’t are looking at getting involved for the first time.

In case you are tempted to shrug off this potential source of money as pocket change, don’t. The survey found the median office has $276 million in investable assets, and that since 2009, the 109 offices that have invested in private equity have allocated $8 billion.

Grant Thornton had Prince Associates conduct the survey of domestic and foreign offices during the first quarter of 2012. It uncovered a remarkable level of commitment. Seventy-eight percent of the offices already invest in private equity. A similar survey in 2009 found only about 30% of offices involved.

Clearly the level of comfort with the asset class has grown. Of those family offices that invest in private equity, 17% put 25% of their investable assets or more to work. More common is between 10% and 25%. Forty-seven percent of offices fall in this category.

Their approach is to both use funds and direct investments. Slightly more than two-thirds invest in funds and just over half invest directly in startups, and not just at the seed stage. Another 29% co-invest with funds.

Despite the enthusiasm, making contact is not always easy. The top suggestion is to network. Single-family offices rely on referrals from trusted professionals, directors and other single-family offices. They also increasingly apply extensive due diligence.

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