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A version of this text first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Enroll to receive future editions, straight to your inbox.
The variety of family offices on this planet has tripled since 2019, setting off a recent race amongst private equity firms, hedge funds and enterprise capital firms to draw their investments.
In accordance with a recent report from Preqin, the variety of family offices — the private investing arms of rich families — topped 4,500 worldwide last 12 months. North America has the biggest share of family offices, with 1,682. Greater than half of all of the family office assets on this planet are in North America.
Experts say family offices now manage $6 trillion or more, and their ranks are growing. There are greater than 2,600 billionaires on this planet, just about all of them requiring a family office. And the number of individuals on this planet value $100 million or more — the everyday threshold for a family office — has surged to greater than 90,000, in accordance with Wealth-X, an Altrata company. In other words, there’s more room to run.
The family office boom has caught the eye of personal equity firms and other alternatives managers who need to raise funds. Blackstone, KKR and Carlyle have all been expanding their teams, funding events and constructing products catering specifically to family offices.
“The larger private equity managers try to compete there by putting in resources and time,” said Rachel Dabora, research insights analyst at Preqin. “Ultra-high-net-worth investors and family offices are really on their radar.”
On the surface, family offices are dream clients for alternatives. For years, family offices sought basic wealth preservation with traditional stocks-and-bonds portfolios. Now they’re more like institutional investors, looking for higher long-term returns with private equity, enterprise capital, hedge funds, infrastructure and real estate. Family offices have the very best allocation to hedge funds of any style of institutional investor, in accordance with Preqin.
Granted, the past two years have been tough on private equity, enterprise capital and lots of hedge fund returns.
Greater than half of the family offices that Preqin surveyed said they’ve been upset with their enterprise capital returns, while a 3rd have been upset with private equity. Yet they continue to be longing for this 12 months and beyond, with a majority saying private equity and enterprise capital will do higher over the subsequent 12 months.
Private equity firms are going after the family office market aggressively. Blackstone, which has served wealthy individuals for a long time through its Private Wealth Solutions business, is ramping up its Private Capital Group, which serves family offices, billionaires and the biggest, most sophisticated individual investors. That team has doubled to 25 people over the past few years and is more likely to continue to grow, in accordance with Craig Russell, global head of Blackstone’s Private Capital Group.
“We view this as a considerable and growing opportunity for Blackstone,” Russell said.
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