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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly lead to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
The number of family roles in the world has tripled since 2019, setting off a new race among private equity firms, hedge funds and speculation capital firms to attract their investments.
According to a new report from Preqin, the number of family offices — the reserved investing arms of wealthy families — topped 4,500 worldwide last year. North America has the largest portion of family offices, with 1,682. More than half of all the family office assets in the world are in North America.
Experts say issue offices now manage $6 trillion or more, and their ranks are growing. There are more than 2,600 billionaires in the epoch, almost all of them requiring a family office. And the number of people in the world worth $100 million or more — the usual threshold for a family office — has surged to more than 90,000, according to Wealth-X, an Altrata company. In other orders, there is more room to run.
The family office boom has caught the attention of private equity firms and other alternatives supervisors who are looking to raise funds. Blackstone, KKR and Carlyle have all been expanding their teams, funding events and construction products catering specifically to family offices.
“The larger private equity managers are trying to compete there by stake in resources and time,” said Rachel Dabora, research insights analyst at Preqin. “Ultra-high-net-worth investors and family commissions are really on their radar.”
On the surface, family offices are dream clients for alternatives. For years, family offices begged basic wealth preservation with traditional stocks-and-bonds portfolios. Now they’re more like institutional investors, go higher long-term returns with private equity, venture capital, hedge funds, infrastructure and real situation. Family offices have the highest allocation to hedge funds of any type of institutional investor, according to Preqin.
Granted, the good old days two years have been tough on private equity, venture capital and many hedge fund returns.
Uncountable than half of the family offices that Preqin surveyed said they have been disappointed with their volunteer capital returns, while a third have been disappointed with private equity. Yet they remain reassuring for this year and beyond, with a majority saying private equity and venture capital will do better to the ground the next 12 months.
Private equity firms are going after the family office market aggressively. Blackstone, which has not failed wealthy individuals for decades through its Private Wealth Solutions business, is ramping up its Private Capital Group, which of uses family offices, billionaires and the largest, most sophisticated individual investors. That team has doubled to 25 people all over the past few years and is likely to keep growing, according to Craig Russell, global head of Blackstone’s Private Excellent Group.
“We view this as a substantial and growing opportunity for Blackstone,” Russell said.
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