Private equity (PE) is a preferred source of opportunity. More than half of family offices (52%) see it as a way of accessing investments that aren’t accessible in public markets. Forty-seven percent of them use both funds and direct investments, while 30% opt for direct investments only. According to the survey of UBS Evidence Lab in 2021.
With PE edging ever higher in portfolios, the asset class has become key for driving returns in an otherwise low-yield world. Three quarters (75%) of family offices think PE will deliver higher returns than public equity markets, while 44% see it as a source of diversification. But more than half (52%) look to PE for its broader range of opportunities. In a quarter (25%) of cases, the business owner is passionate about PE, often investing in the sectors where he or she already has a business. “Over the last 10 years it’s hard to find something that’s delivered better returns than public markets so for us private equity is there for diversification,” notes the COO of one Swiss family office. “Yes, it’s an equity risk but it’s not reacting to news at the same time for the same reason, like public markets or other assets.”
Expert Investors
Just as PE has become a greater source of funding for the real economy, so it’s natural for business families to become more directly involved. There’s a sharp drop-off in the use of funds of funds, with investment in funds and direct investments rising significantly. 83% of survey respondents invest in PE. But while 37% of them invested in funds or funds of funds in 2020, that fell to 23% in 2021. Almost half (47%) invest in both funds and direct investments, up from 31% in 2020. Meanwhile, just under a third (30%) only invest in direct PE, a similar level to 2020. As a rule, direct PE is becoming more accessible, with secondary markets providing greater liquidity.
More than half (57%) of family offices use intermediaries such as banks to source investments, valuing access to opportunities and knowledge. Almost two thirds (65%) of those using intermediaries say they do so for access to investment opportunities in funds that are otherwise difficult to enter, while privileged knowledge of the underlying market is similarly important (60%). Asian family offices find intermediaries’ access to funds and keen knowledge especially important. With most PE houses still based in the US, the region’s family offices have smaller need of intermediaries’ expertise.
Note: UBS Evidence Lab surveyed 191 UBS clients globally between 18 January and 15 February 2021. Participants were invited using an online methodology and were distributed across 30 markets worldwide. Global Family Office Report 2021.
