In recent years, the number of family offices around the world has seen a dramatic increase, with the total figure tripling since 2019. According to a recent report by Preqin, there are now over 4,500 family offices globally, with North America leading the way with 1,682 offices. Furthermore, family offices in North America hold more than half of all family office assets worldwide. The expansion of family offices can be attributed to the increasing number of billionaires and ultra-high-net-worth individuals, which has surged to over 90,000 people globally, all requiring the services of a family office for wealth management.
Traditionally, family offices have focused on wealth preservation through traditional investment avenues such as stocks and bonds. However, there has been a notable shift in recent years towards alternative investments such as private equity, venture capital, hedge funds, infrastructure, and real estate. Family offices are increasingly seeking higher long-term returns, resembling institutional investors in their investment strategies. In fact, family offices have the highest allocation to hedge funds compared to any other type of institutional investor, signaling a growing appetite for more diverse and sophisticated investment opportunities.
While family offices have shown interest in alternative investments, the past two years have presented challenges for private equity, venture capital, and hedge fund returns. According to Preqin, more than half of family offices reported dissatisfaction with their venture capital returns, while a third expressed disappointment with private equity results. Despite these setbacks, there remains optimism within the family office sector, with a majority believing that private equity and venture capital investments will perform better in the coming years. This positive outlook has attracted the attention of private equity firms like Blackstone, KKR, and Carlyle, who are actively pursuing opportunities within the family office market.
Blackstone, a prominent player in the investment industry, has recognized the potential within the family office market and is strategically expanding its Private Capital Group to cater to the needs of family offices, billionaires, and high-net-worth individuals. The Private Capital Group, which has doubled its team size to 25 people in recent years, is poised for further growth to meet the increasing demand from family offices. Craig Russell, the global head of Blackstone’s Private Capital Group, views this market segment as a significant and expanding opportunity for the firm, indicating their long-term commitment to serving the evolving needs of family offices.
The rise of family offices presents a new frontier for investments, offering diverse opportunities and challenges for both family offices and alternative investment firms. As family offices continue to seek higher returns and diversify their portfolios, the investment landscape is evolving to accommodate these changing demands. With the growing interest from private equity firms and the strategic expansion of firms like Blackstone, the family office market is poised for continued growth and innovation in the coming years.
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