The landscape of investing is constantly evolving, and one of the latest trends is the rapid expansion of family offices around the world. These private investing arms of wealthy families have been growing at an unprecedented rate, with the number of family offices tripling since 2019. This surge has not gone unnoticed, as private equity firms, hedge funds, and venture capital firms are now in a race to attract the attention and investments of these family offices.
According to a recent report from Preqin, there are now over 4,500 family offices worldwide, with North America leading the way with 1,682 family offices. The majority of family office assets in the world are also located in North America, highlighting the region’s dominance in this space. The rise in the number of family offices can be attributed to the growing number of ultra-high-net-worth individuals, with over 2,600 billionaires and more than 90,000 individuals worth $100 million or more globally. This trend indicates that there is still ample room for growth in the family office sector.
Family offices have traditionally focused on wealth preservation through traditional investments like stocks and bonds. However, the investment landscape is shifting, and family offices are now increasingly seeking higher long-term returns through alternative investments such as private equity, venture capital, hedge funds, infrastructure, and real estate. In fact, family offices have the highest allocation to hedge funds compared to any other type of institutional investor, according to Preqin.
While family offices are venturing into the world of alternative investments, the past few years have posed challenges for returns in private equity, venture capital, and hedge funds. Despite some disappointments in returns, family offices remain optimistic about the future, with a majority expecting private equity and venture capital to perform better over the next 12 months. This positive outlook has not gone unnoticed by private equity firms, as they are now aggressively targeting the family office market.
Private equity giants like Blackstone, KKR, and Carlyle have been expanding their teams and offerings to cater specifically to family offices. Blackstone, for example, has bolstered its Private Capital Group to serve family offices, billionaires, and sophisticated individual investors. With a team that has doubled in size over the past few years, Blackstone is betting big on the growing opportunities presented by family offices. Craig Russell, global head of Blackstone’s Private Capital Group, views this market as a substantial and expanding opportunity for the firm.
The rise of family offices has reshaped the investment landscape, with private equity firms and other alternatives managers vying for a piece of the pie. As family offices continue to grow in number and influence, they are driving demand for alternative investments and reshaping the strategies of traditional wealth management. The future looks promising for family offices, as they navigate the evolving investment landscape and seek higher returns in a competitive market.
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