While direct investment has been an option for family offices since the early 2000s, their popularity surged between the 2010-2015 period, highlighting the highest growth in direct investment activity in any 5-year period since 1990. The 2020 FINTRX Family Office Industry Report further noted that, on average, 55% of family offices were making direct investments across the globe. We will take a deeper dive into what makes direct investing such a lucrative investment strategy for family offices and what potential advantages it holds over the existing traditional ones.
The drivers of the trend
A recent EY report suggested private market investments accounted for nearly 18% of total asset allocation by family offices and UHNWIs in 2021. These investments were traditionally executed via third-party asset managers. However, an increasing number of family offices, especially single family offices, have begun exploring sophisticated in-house investment infrastructures to pursue these investments directly. Here are the primary drivers behind this trend: