NEW YORK, NY – iCapital Network, an online platform allowing qualified investors and their advisors access to a curated selection of private investments, launched an annual report reviewing single-family office investment activities specifically in private equity.
The report, which was based on data collected from 162 single-family offices from around the globe with an average net worth of $918 million, found that a large percentage reported strong performance via private equity investments, especially in contrast to other vehicles and asset classes held in their portfolios.
“In our view, the potential for superior investment returns is the single most influential factor in why private equity is viewed so favorably by single-family office investors these days,” said Lawrence Calcano, Managing Partner of iCapital Network. “And likely the potential opportunity to take more of a hands-on role in managing or supervising a direct investment also adds to the appeal – because in many cases, families can provide valuable insights and leadership drawn from their own experience as business leaders.”
Seventy percent of single-family offices surveyed said that their private equity funds outperformed other investments within their portfolios, and 75 percent said that their direct investments outperformed other holdings.
“Many wealthy families take a longer term investment approach and understand that the premium for illiquidity comes from allowing companies to pursue strategies that often require four to six years to execute as well as additional capital,” said Nick Veronis, Co-Founder and Managing Partner of iCapital Network. “These families also appreciate the active role that fund managers play, working closely with their portfolio companies to achieve their goals – that alignment and consistent engagement typically does not exist in the public markets.”
Majority of Private Equity Allocations are Ten Percent or More
The report examined how single-family offices invested in private equity over the two previous calendar years, with particular attention to portfolio allocations, preferred ways to access, performance results and future plans regarding the asset class. Private equity investments are common among the majority of single-family offices with almost two-thirds (62 percent) of those surveyed actively investing in private equity.
Of those two-thirds, over 90 percent allocate 10 percent or more to it via funds and/or direct investment. Over 70 percent allocate between 10 and 20 percent to private investments. Over 10 percent allocate between 20 and 50 percent, while over 8 percent allocate more than 50 percent of their portfolio to private investments.
“Single-family offices have the autonomy to invest in the ways that best suit the underlying family and its long-term goals,” said Hannah Shaw Grove, Senior Vice President and Chief Marketing Officer of iCapital Network. “This can be seen in the relatively high allocations to private equity, which parallel the approach used by many large endowments to manage downside risk and increase return potential over extended periods of time.”
Private equity can be accessed in a number of different ways and single-family offices are taking advantage of multiple vehicles and structures. Of the group that invests, more than nine out of ten respondents invested in funds while about 40 percent were also investing directly in companies.
The single-family offices surveyed provided a perspective of significant, global wealth, with the responding organizations representing families from four continents with average net worth of approximately US$918 million and investable assets of approximately US$400 million.
More than half of all the single-family offices surveyed were based in the United States, approximately 20 percent of the respondents were from Europe and Asia, respectively, and fewer than 10 percent were from South America.
Private Equity Allocations Predicted to Rise
Of the single-family offices currently investing in private equity, 57 percent expect to increase their allocation in the next two years. Of the group that was not investing, nearly 30 percent planned to allocate to private equity in the coming 24 months.
“Strong performance and favorable sentiment will likely prompt fundraising professionals to intensify their efforts with family offices,” said Dan Vene, Founder and Managing Partner of iCapital Network. “We can also expect the number of funds and bankers focused on the channel to increase, making for a more competitive capital raising environment.”
About the Research
To help establish a benchmark for how single-family offices invest in private equity, iCapital Network partnered with RA Prince & Associates, Inc. for its long-standing experience conducting primary research in the high-net-worth markets. Its research operation has studied family offices consistently over the past 30 years and the firm’s principal, Russ Alan Prince, worked with iCapital Network to build and analyze a custom data set from their proprietary database. As part of the research effort, data was collected from 162 single-family offices between 2013 and 2014 and used to examine how single-family offices invested in private equity with particular attention to portfolio allocations, preferred ways to access, performance results and future plans regarding the asset class. The single-family offices surveyed provided a perspective of significant, global wealth, with the responding organizations representing families from four continents with average net worth of approximately US$900 million and investable assets of approximately US$400 million. More than half of all the single-family offices surveyed were based in the United States, approximately 20 percent of the respondents were from Europe and Asia, respectively, and fewer than 10 percent were from South America.
About iCapital Network
iCapital Network provides a financial technology platform that bridges HNW investment capital with private investment opportunities. The comprehensive investment platform enables qualified investors, advisors and family offices to review private equity funds that are currently raising capital. It offers powerful research tools, comprehensive diligence support and access to a curated selection of private equity funds. Additionally, the platform streamlines and automates administrative and reporting requirements such as fund commitments, capital calls, distributions, tax reporting and fund statements. Visit icapital.com for more information.
Disclosures: This material is provided for informational purposes only and is not intended as, and may not be relied on in any manner as legal, tax or investment advice, a recommendation, or as an offer to sell, a solicitation of an offer to purchase or a recommendation of any interest in any fund or security described herein. Past performance is not indicative of future results. Private equity funds are complex, speculative investment vehicles and are not suitable for all investors. An investment in a private equity fund entails a high degree of risk and no assurance can be given that any alternative investment fund’s investment objectives will be achieved or that investors will receive a return of their capital. The information contained herein is subject to change and is also incomplete. This industry information and its importance is an opinion only and should not be relied upon as the only important information available. Securities offered through iCapital Securities, LLC, a registered broker dealer, member of FINRA and SIPC and subsidiary of Institutional Capital Network, Inc. All rights reserved.
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Disclosures: This material is provided for informational purposes only and is not intended as, and may not be relied on in any manner as, legal, tax or investment advice, a recommendation, or as an offer to sell, a solicitation of an offer to purchase or a recommendation of any interest in any fund or security offered by iCapital. Past performance is not indicative of future results. Alternative investments are complex, speculative investment vehicles and are not suitable for all investors. An investment in an alternative investment entails a high degree of risk and no assurance can be given that any alternative investment fund’s investment objectives will be achieved or that investors will receive a return of their capital. The information contained herein is subject to change. Securities may be offered through iCapital Securities, LLC, a registered broker dealer, member of FINRA and SIPC and subsidiary of Institutional Capital Network, Inc. iCapital is a registered trademark of Institutional Capital Network, Inc. All rights reserved.
