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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up To receive future editions delivered directly to your inbox.
The number of family offices globally has tripled since 2019, sparking a new race among private equity firms, hedge funds and venture capital firms to attract investment.
According to a new report from Preqin, the number of family offices (private investment vehicles of wealthy families) worldwide exceeded 4,500 last year. North America has the largest number of family offices, with 1,682. More than half of the world’s family office assets are located in North America.
Experts say family offices currently manage $6 trillion or more in assets and are growing in size. There are more than 2,600 billionaires in the world, and almost all of them need a family office. The number of people worldwide worth $100 million or more, the typical threshold for family offices, has surged to more than 90,000, according to data from Altrata company Wealth-X. In other words, there’s more room to run.
The boom in family offices has caught the attention of private equity firms and other alternative investment managers looking to raise capital. Blackstone, KKR and Carlyle are all expanding teams, funding campaigns and building products specifically for family offices.
“The larger private equity managers are trying to compete by committing 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 face of it, family offices are ideal clients for alternatives. For many years, family offices have sought to achieve basic wealth preservation through a traditional portfolio of stocks and bonds. Now they are more like institutional investors, seeking higher long-term returns through private equity, venture capital, hedge funds, infrastructure and real estate. Family office hedge funds have the highest allocations among all types of institutional investors, Preqin said.
To be sure, the past two years have been tough for returns in private equity, venture capital and many hedge funds.
More than half of family offices surveyed by Preqin said they were disappointed with venture capital returns, while a third were disappointed with private equity. However, they remain hopeful for this year and beyond, with most saying private equity and venture capital will perform better in the next 12 months.
Private equity firms are aggressively competing for the family office market. Blackstone has served wealthy individuals for decades through its Private Wealth Solutions business and is now expanding its Private Capital Group, which serves family offices, billionaires and the largest and most sophisticated individual investors. Provide services. The team has doubled to 25 people in the past few years and is likely to continue to grow, said Craig Russell, global head of Blackstone Private Capital Group.
“We see this as a large and growing opportunity for Blackstone,” Russell said.
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