As discussed in our previous articles, Family Offices across the globe are now facing an increasingly complex landscape with economic uncertainty, rapid technological progress, regulatory changes and succession planning.

As they strive to preserve and grow their wealth for the families they serve, we observed that two trends have emerged: private equity and succession planning.

Increased allocation to Private Equity

Family Offices are broadening their investment horizons. While traditional assets like stocks and bonds continue to hold their significance, there is an increasing focus on alternative investments, with a particular emphasis on Private equity.

In recent years, Private equity has gained significant traction among Family Offices. The allure of potentially higher returns, access to unique investment opportunities and the opportunity for diversification have made Private equity an attractive choice for investors.

According to the insightful Deloitte Top 10 Family Office Trends report in 2023, Private equity is now the asset class of choice within the Family Office sector, accounting for 30% of the typical investment portfolio.

Challenges and Strategies

While Private equity is a lucrative investment for Family Offices, it also presents unique challenges. The illiquid nature of private equity investments means that capital is tied up for extended periods, which requires a long-term perspective.

The complex nature of private equity transactions and the need for specialised expertise can make it difficult for Family Offices to navigate it. To overcome this, Family Offices must conduct due diligence and diversify their Private equity investments across various sectors and geographical regions. It is also important to ensure that investments are consistent with the family’s mission and goals.

To effectively manage Private equity investments, Family Offices can also:

  • Build Strong In-House Expertise: Develop internal capabilities or partner with experienced professionals.
  • Partner with Reputable Firms: Collaborate with reputable Private equity firms that have a strong track record.
  • Focus on Long-Term Value Creation: Prioritise investments that offer sustainable returns and contribute to the family’s long-term financial goals.

More Focus on Succession Planning

Succession planning is paramount for ensuring the continuity and legacy of Family Offices. A well-crafted plan addresses the transfer of wealth, leadership and family values across generations. However, our 2023 Global Family Office Compensation Benchmark Report reveals a sobering insight: nearly half of the Family Offices we surveyed lack a formalised succession plan. This is particularly concerning, given the primary objective of many Family Offices is preserving wealth for future generations.

Successfully bridging generational divides and aligning their viewpoints cannot be overstated. Without a clear roadmap for a leadership transition, Family Offices not only risk jeopardising their long-term financial security but also the cohesion within the family.

To effectively implement succession planning:

  • Involve the Next Generation Early: Ensure they take time to understand the family business and its values.
  • Create a Formal Succession Plan: Establish a comprehensive plan that clearly defines roles, responsibilities and timelines within the governance fabric of the Family Office.
  • Implement Strong Governance: Integrate the succession plan into a well-defined governance framework that supports long-term stability.
  • Ensure Alignment with Family Values: Ensure that the succession plan aligns with the family’s mission and goals.

In 2024, private equity and succession planning are top trends for Family Offices. By strategically navigating these areas, Family Offices can enhance their financial performance, preserve their legacy and ensure a prosperous future for generations to come.

At Agreus, we specialise in recruiting top talent for Family Offices. Our experienced team can help you find the right individuals to support your investments and succession planning initiatives. For over 14 years, we have worked with many Family Offices to help them find their perfect hire. Contact us for a tailored conversation on how we can assist you.

For insightful perspectives and to stay updated in the Family Office industry, visit Agreus’ knowledgebase. Here, you will discover detailed analyses and key resources to help you navigate the complexities of wealth management effectively.