A report from Cebile Capital, a placement agent and adviser in the private equity sector, finds that European family offices have increased their allocation to private equity compared with five years ago.
The firm found that private equity now represents nearly a quarter of the average portfolio of European family offices, mostly in venture capital, compared with an allocation that was sub 15 per cent five years ago.
Cebile Capital’s report analyses the appetite and preferences that family offices have for private equity investments and outlines the steps GPs should take when targeting family offices as investment partners.
Key findings were that venture is the most popular type of private equity fund investment for family offices in Europe, with 50 per cent stating a preference for venture funds versus 40 per cent for other European institutions.
Buyout and growth followed in order of preference, with 41 per cent and 35 per cent of family offices respectively stating a preference for these types of funds. There is less demand for mezzanine finance (8 per cent) and resources, which just 6 per cent of family offices said they’d consider investing in.
European family offices are more cautious than traditional institutions when it comes to new launches. Just 11 per cent of those surveyed would consider investing in first time funds, versus 42 per cent of European institutional investors.
There is a clear sector preference amongst family offices for IT, which 24 per cent of European family offices are willing to invest in, as well as healthcare (19 per cent), telecoms and media (18 per cent), both in fund and direct private equity investments.
Food and agriculture is the least popular sector, with just 5 per cent willing to invest in companies of this kind.
In terms of geography, European family offices prefer to invest in the countries they know, with 66 per cent willing to invest in Europe. Approximately one third would consider investing in North America or Asia, while just 6 per cent would consider Latin America and just 3 per cent Africa.
Despite family offices increasing their allocation to private equity, GPs continue to struggle with accessing this type of investor. They also experience challenges when assessing how private equity fits in the portfolios of investment groups whose overall focus is on capital preservation, rather than returns.
The speed of deal execution demanded by family offices can also be demanding for GPs. However, they are unlikely to make a quick decision unless they have established a strong relationship with a General Partner. Cebile Capital advises fund managers to form these relationships well before the launch of fundraising.
