Family Offices Look To Private Equity
Thursday, May 20, 2010

More than half of the European family offices which responded to a recent survey said that they were considering increasing their exposure to private equity this year.

The study of 50 family offices across Europe by LPEQ shows that 57% are looking to access private equity through a wide range of strategies and investments.

LPEQ's research, carried out by the Scorpio Partnership, is the largest European study of family office attitudes to private equity and includes the views of single family offices, multi family offices and private bank family offices. 

Nearly all the family offices which took part in the survey regard private equity as a key asset class for families. According to the researchers, this reflects the fact that the majority of families have accumulated their wealth through business or entrepreneurial activities.

The study shows that allocations made to private equity differs between the various type of family offices. Multiple family offices and private bank family offices are more likely to allocate small sums to private equity, reflecting their more conservative approach to asset management. On the other hand, more than 60% of single family offices responded that they are allocating more than 15% of their portfolio to private equity.

Andrea Lowe, Executive Director of LPEQ said: "The private equity story will remain a compelling one as families look to buy into the real economy and get away from products."

Family offices typically access private equity through a combination of direct investment, limited partnership funds and listed private equity, the study shows. But while direct investment can give the family offices more influence, Lowe warns that this method of investment can lead to liquidity concerns.

"Listed private equity offers a combination of liquidity, diversification and ease of access that is attractive to a wide audience in the family office universe," Lowe observed. "These features mean that listed private equity can offer family offices a complementary route to investing in private equity alongside direct investment and limited partnership funds."

The research also shows that family office attitudes to private equity are changing, with many considering increasing their exposure. As the economic conditions continue to present value opportunities, many are predicting that 2010 could be a "vintage year" for private equity, the researchers conclude.

"Private equity is a key asset class for family offices," noted Cath Tillotson, Managing Partner at Scorpio Partnership. "They have an affinity to the sector, an appreciation for the value opportunities that post-crisis vintage years may offer and value the diversification it provides."