The family offices surveyed for Citi’s Global Family Office Survey Insights 2023 found that while about two-thirds of family offices are seeking deals, more than one-third are pausing new dealmaking due to the uncertain economic environment. When family offices do make direct private equity investments, they show a strong preference for minority stakes (78%) rather than controlling positions (22%).
The reasons that family offices have been attracted to direct investing are still valid: “They’re looking for better returns, trying to leverage what they see as a competitive advantage: the ability to buy an asset and hold the asset for five years, 10 years, 20 years sometimes – rather than invest in private equity, where typically the time horizon is five to seven years,” Monnier says.
In Asia Pacific, direct investment was substantially below the global average of 80%: Only 69% of family offices in that region said they engage in direct investing. In North America, the number was 86%; in Europe, the Middle East and Africa it was 87%; and in Latin America, it was 76%.
In the current climate, Monnier says, some may be concerned that investments already in their portfolio will require more time and attention — and perhaps more capital.
When asked if they are bullish on direct private equity, respondents in North America were the most enthusiastic, with 47% saying they were. In Asia Pacific, on the other hand, only 29% said they were. North American family offices also had weightings in direct private equity (14%) that were about twice the average of the rest of the world.
Where do family offices find their direct deals? The survey asked about the sources of direct investing deal flow:
- internal team: 51%
- Other families or family offices: 49%
- Networking groups/investment clubs: 36%
- Investment advisors: 24%
- Banks: 21%
There was some regional variation regarding sourcing deals, as well. Internal teams were a more frequent source of deals in Asia Pacific (58%) and North America (56%) than in Latin America (33%). Other families and family offices were the most common source in Latin America (63%).
