According to Vidur G. Gupta, Finance Expert at toptal and based on a report by UBS, the origins of a given family’s wealth determines the family offices’ risk appetite, its investment style, and its allocation choices. US and Asian families are most keen on investing in “growth” assets, with heavy weighting toward venture capital and private equity.
iCapital research shows that first-generation single family offices tend to prefer alternative assets such as real estate, private equity, and venture capital. In addition to the generation, country, and origin of wealth, the sfamos’ strategy is also defined by the size and stage (institutional maturity/experience) of the family office itself.
Longer-tenured family offices increasingly employ experienced management teams to invest their capital across an array specialty asset classes. This is especially true for active positions in equity and bond markets, given family offices have historically invested in hedge funds or private equity funds as fund-of-funds investors. The increasing size of Famos and desire to have stronger control over investments and outcomes has propelled them to “insource” professional management teams.
As an asset class, private equity also holds some other advantages over hedge funds regarding family offices. It fits with families’ “emotional desire to back entrepreneurs and ideas they believe in,” according to Philip Higson, Vice Chairman of the family office group at UBS.
“In the search for yield, family offices are playing to their strengths by allocating longer-term and accepting more illiquidity,” a report from UBS and Campden Wealth notes. “This approach is successful when experienced in-house teams have sufficient bandwidth for conducting due diligence and managing existing private market investments.”