The Rise of Family Offices: A Significant Increase Since 2019 Spurs a New Phenomenon on Wall Street
In recent years, there has been a significant rise in the number of family offices around the world, setting off a new race among private equity firms, hedge funds, and venture capital firms to attract their investments. According to a report from Preqin, the number of family offices, which are the private investing arms of wealthy families, has tripled since 2019, reaching over 4,500 worldwide. North America has the largest share of family offices, with 1,682, and more than half of all family office assets in the world are located in this region.
Experts estimate that family offices now manage $6 trillion or more, and their ranks are growing rapidly. With over 2,600 billionaires in the world, almost all of them requiring a family office, and more than 90,000 individuals worth $100 million or more, there is still ample room for expansion in this market.
The family office boom has caught the attention of private equity firms and other alternative managers who are keen to raise funds. Companies like Blackstone, KKR, and Carlyle have been expanding their teams, funding events, and creating products specifically tailored to family offices. Private equity managers are putting in resources and time to compete for these ultra-high-net-worth investors and family offices.
Traditionally, family offices sought basic wealth preservation through traditional stocks-and-bonds portfolios. However, they have now transformed into institutional investors seeking higher long-term returns through private equity, venture capital, hedge funds, infrastructure, and real estate. In fact, family offices have the highest allocation to hedge funds among all types of institutional investors.
Despite the challenging past two years for private equity, venture capital, and many hedge fund returns, family offices remain hopeful for the future. Over half of the surveyed family offices expressed disappointment with their venture capital returns, while a third were disappointed with private equity. However, they believe that private equity and venture capital will perform better in the next 12 months.
Private equity firms are aggressively targeting the family office market. Blackstone, for example, is ramping up its Private Capital Group, which serves family offices, billionaires, and the largest individual investors. The team has doubled in size over the past few years and is expected to continue growing. Craig Russell, the global head of Blackstone’s Private Capital Group, sees this market as a substantial and growing opportunity for the company.
The rise of family offices has become a new phenomenon on Wall Street, attracting the attention of private equity firms, hedge funds, and venture capital firms. With their increasing numbers and significant assets under management, family offices have become important players in the investment landscape. As they seek higher long-term returns, private equity and venture capital firms are adapting their strategies to cater to these sophisticated investors. The future looks promising for both family offices and the alternative investment industry as they navigate the evolving financial landscape together.
