Skip Links

Together or separate?

That is the question for family office investments

10 min read

Family office investment capital, unlike institutional capital, is rarely a single, consolidated pool. Instead, it belongs to multiple family investors—individuals and trusts. The family office advises, oversees and manages this investment capital on their behalf. With multiple investors, the question often arises about whether to combine family investment capital or keep each family investor‘s capital separate.

Each family investor (FI), like any investor, has unique goals, risk tolerance, time horizon, liquidity needs, tax considerations and personal preferences. In practice, this means each FI portfolio will differ in its asset allocation—though typically with significant overlap across asset classes, strategies and managers with other FIs. Some FIs may favor fixed income or hedge funds; others may lean toward private equity or direct investments. This portfolio differentiation is acutely felt within multi-generational family offices.

Our focus here is not to prescribe ideal asset allocations or investment strategies. Rather, it is on how families organize themselves—how they structure the way capital is deployed. As Peter Drucker maintains, “structure must be designed to make strategy effective.” So, strategy first, structure second.

Too often, investment structures are inherited from an earlier generation or built hastily for convenience, without alignment to the family’s current state, strategy or scale.

Many families and family offices consider how to invest collectively while allowing for customization and flexibility within their investment structures. One approach is to establish pooled investment vehicles, which can be used alongside separate non-pooled investments.

This discussion covers the advantages, disadvantages and trade-offs associated with combining and separating family investment capital. The intention is to provide information to tradeoffs assist families and family offices as they decide how to organize and structure their investment capital. Specifically, how to combine their investment capital but to do so in a way that allows for FI customization, while leveraging scale.

Stockbroker analyzing chart on computer monitor

Leveraging scale while creating flexibility

The family investment structure should be designed to support a range of investment strategies while maximizing the advantages of scale. A common method involves creating multiple Family Investment Partnerships (FIPs), typically organized by asset class and strategy. Each FIP may contain several managers or investment products. This arrangement allows each FI to tailor asset allocation decisions while simultaneously leveraging the benefits of scale.

A separate FIP can be established for each asset class, such as:

Equities
Real assets

Fixed income
Hedge funds

Private equity
Cash

To enhance segmentation and provide greater flexibility, sub-asset class FIPs may be established. For example, within equities, these could include US large cap, US SMID, and international developed and emerging markets, as appropriate. Other asset classes can similarly designate their relevant sub-asset classes. Each FIP may allocate to multiple managers. Subsequently, each FI determines its allocation by directing contributions among the various FIPs in accordance with its unique asset allocation.

Each FI must first determine its own appropriate asset allocation and investment strategy. Ideally, this should be done by establishing an investment policy statement (IPS) for each FI.¹

From time to time, FIs may pursue one-off investments that are not joined by other FIs. Indeed, FIs have the option to invest independently without pooling their capital.

Nevertheless, families frequently collaborate on direct investments, for which a special purpose vehicle may be created to consolidate funds.

Illustrating the dynamic

To illustrate, let’s take a multi-generational family that has combined $500M of liquid investment capital, but the capital is owned by 20 separate FIs, either individuals or trusts.

Figure 1

Funds	Funds	Combined family investment capital	Combined family investment capital	20 separate FI portfolios	20 separate FI portfolios
Funds	Investment capital	Combined family investment capital	$500M	20 separate FI portfolios	$25M
Funds	Investment Advisory (“IA”) fee differential²	Combined family investment capital	Null	20 separate FI portfolios	+50bps more than the $500M portfolio fee
Funds	Aggregate family investment advisory fee at +50bps	Combined family investment capital	Null	20 separate FI portfolios	+$2.5M
Funds	IA fee per FI at 50bps differential	Combined family investment capital	Null	20 separate FI portfolios	+$125,000/FI

Scale vs. separate: comparing fees, costs and expenses

Let’s start with a discussion of investment advisory fees. Smaller portfolios may face higher fees, while larger pools of capital can often negotiate lower fees. This does not include potential discounts on fund management fees.

In Figure 1, the separate FIs are paying a higher fee for investment advisory to the tune of $125,000 per FI and a family aggregate of an additional $2.5M, compared to pooling their investment capital.

Smaller pools of capital may incur higher per unit investor costs because expenses, such as custody and accounting, are distributed among fewer investors rather than across a single larger investment capital group.

Two business people in meeting at curved desk overhead view

There are differences in qualitative costs. For direct investments, diligence expenses—covering legal, tax and investment reviews—can be shared across more capital if families co-invest. Communication between family office staff, financial advisors and fund managers is streamlined, avoiding separate discussions with each party. Collaborative investing typically reduces the number of advisory relationships to a few key professionals, rather than each family investor having their own advisor or firm.

Managing separate portfolios increases monitoring and administration costs for family office staff, as each requires individual oversight and extra paperwork. This includes more subscription documents, wires, cash flows, distributions, and alternative investment workflows. As a result, additional staff may be needed to handle the workload.

Customization, flexibility and access

Separate portfolios let each FI tailor investment strategies to their own goals, risk profiles, and preferences. Multiple FIPs offer flexibility while maintaining scale benefits, as each can have distinct asset classes and strategies, as shown in Figure 2. FIs can allocate capital to individual FIPs according to their desired asset allocation, enabling the structure to adapt as family needs and strategies change.

Figure 2

Funds	Funds	Combined family investment capital	Combined family investment capital	20 separate FI portfolios	20 separate FI portfolios
Funds	Total investment capital	Combined family investment capital	$500M	20 separate FI portfolios	$25M
Funds	Example: Hedge fund allocation (7.5%)	Combined family investment capital	$37.5M	20 separate FI portfolios	$2.5M
Funds	Example: Private equity allocation (20%)	Combined family investment capital	$100M	20 separate FI portfolios	$5M

Separate portfolios can limit investment strategy access, as many alternative investment managers have minimum requirements. This may reduce access to investment strategy options. For instance, obtaining both private equity strategy and manager diversification with a $5M allocation per FI could present challenges, making a PE allocation less likely.

Conversely, if the family combines allocations for a total of $100M in PE, it can unlock access, since achieving strategy and manager diversification is more practical at that scale.

Private equity: evergreen v. vintage vehicles

For a family’s private equity strategy, there are two common structural options: an internal evergreen structure or a vintage vehicle. A vintage vehicle operates similarly to a closed-end fund and is established periodically. This arrangement allows each FI to adjust their private equity allocations with each new vintage vehicle. An evergreen structure may present challenges regarding valuations, as FIs may enter or exit the fund at various times.

Downsides of a super FIP

Some families choose to establish a single FIP with a single asset allocation for all FIs. This is a mistake. Using a single FIP that pools all FI investor capital may not account for different risk profiles, trust objectives (such as dynasty trusts compared to taxable estates), or individual preferences. This method can also impact liquidity and allocations for some FIs. For example, if some FIs habitually take distributions from the FIP, while others do not, the non-distributing FIs can be left overallocated to illiquid alternatives. While this construct can work for a period of time, it is not built to scale with the growth of the family and their divergent investment preferences, and deconstructing the vehicle can be very complex.

Family collaboration

There are differences in control between separate portfolios and shared FIPs. In separate portfolios, the trustee or individual is responsible for making investment decisions. In an FIP, overall control may be less direct, as decisions are typically made by an LLC manager or family investment committee, depending on the structure.

Continuous collaboration in business-owning families can cause agreement fatigue, so some families value managing their own portfolios independently. Even so, many still choose to collaborate on investments without being legally required to agree every time. Pooled investment vehicle design allows for both flexibility and joint decision-making.

Separate portfolios allow for more transparent performance reporting. In contrast, performance reporting and ownership statements for a partner in an FIP involve an additional ownership or entity layer, which may reduce clarity. To facilitate clear ownership and performance reporting, consolidated reporting technology is often necessary.

Separate portfolios can increase intra-family privacy, as they do not require coordination of capital flows. For instance, when a significant distribution is initiated from the FIP, other family members may inquire about the purpose of the distributed capital.

Separate portfolios typically result in a higher speed of execution because decisions are made by either the individual or the trustees. In contrast, within a shared family decision-making structure, execution speed may be slower due to the need to consult multiple parties.

Governance alignment

Governance must be consistent across all components, including the IPS, investment committee, FIPs and trustees. Clear decision-making roles, accountability and investment allocation processes are essential.

With separate FIPs, investment allocations are still managed by the respective FIs, while the family investment committee maintains a broader oversight role: engaging external advisors, assessing managers, and ensuring consistency with the family’s overall investment philosophy. This framework enables each FI to tailor their allocations by allocating capital to the relevant FIPs. Consequently, this structure maximizes the utilization of family capital while offering flexibility and optionality for each FI.

It is important to highlight that, within many family offices, the investment committee typically operates in an advisory capacity rather than holding binding authority—a significant distinction from standard institutional practice.³ In operational terms, the family office investment committee often acts as a central communication platform, promoting transparency and enhancing collaboration among family investors, trustees, and external investment professionals. Even in cases where families opt for segregated portfolios without integrating FIPS, it is not uncommon for them to establish an informal investment committee to facilitate discussions on investment strategies and potential opportunities.

Overlap with broader conversations

Discussions about family investment structures often overlap with broader conversations on how families operate within a family office. Sometimes, family branches or individuals separate from the office for valid reasons. Other times, it is because of a lack of flexibility in the family office for FIs, or treating all investment capital as one pool, which it is not.

Ensuring structures support a family’s shared purpose

If the family chooses to invest together, it’s important to clarify the reasons for doing so. Lower fees and access to different strategies are benefits, but understanding the shared purpose is key. The right structure should support this purpose, with clear execution plans. Evaluating the pros, cons and tradeoffs of investing together or separately helps inform the decision. Comparing the tradeoffs of the current structure and proposed changes helps families make informed choices about future organization.

Mark R. Tepsich

Mark is the Family Office Design and Governance Strategist for UBS Family Office Solutions, advising families across the Americas on family office organizational design, structure and governance, as well as operational best practices and strategy to manage and sustain their wealth for future generations. Prior to joining UBS, Mark built a family office platform for an investment advisory firm and spent a decade as General Counsel for a large single-family office to a dynastic, multigenerational family.

¹ According to the Family Enterprise Governance Report developed in conjunction with Agreus, only 54% of family offices have an investment policy statement somewhere within the family office construct but only 30% of those that have an IPS have one for each family investor.

² The 50bps differential in pricing is related to household pricing. While 50bps was used, it is approximate and can be more or less depending on the scenario. Household pricing is an advantage to having a larger pool of capital. Here, the 50bps increase on separate investment portfolios assumes the FI is not receiving the benefits of household pricing.

³ According to the Family Enterprise Governance Report developed in conjunction with Agreus, nearly 70% of families that have an investment committee, have a construct that is collaborative and advisory in nature, rather than binding.

Mark R. Tepsich
Family Office Design and Governance Strategist
UBS Family Office Solutions

Explore more

Browse additional articles below.

The Longer-term investments
Longer-term investments: Investing in structural trends through equities
Why we believe exposure to structural growth opportunities will play an increasingly important role in equity portfolios, such as AI, power and resources, and longevity.
The Longer-term investments
Learn more
about Balancing fairness and family
Balancing fairness and family: Building an effective compensation policy for family enterprises
How a well-crafted compensation policy can help build trust, accountability and a sustainable foundation for both the business and family.
about Balancing fairness and family
Learn more
About family office
How much is enough? Guidelines for finding the right balance to reflect your family values
Important considerations for families facing important decisions around transferring wealth to heirs as the Great Wealth Transfer accelerates.
About family office
Learn more
about family offices
The cybersecurity vendor maze: What family offices need to know
How cybersecurity needs to be an ongoing program to protect family offices across both institutional and personal realms.
about family offices
Learn more
about History lessons
History lessons: The role of innovation in shaping wealth creation in the US
Explores the role of innovation and technology investments, both historically and today—and why innovation is a key lens for identifying drivers of wealth creation.
about History lessons
Learn more