See our recent piece on Family Office Direct Investing in the Journal of the Global Family Office Community
bringing professional diligence methods to the evaluation of each opportunity
evaluating each opportunity relative to the family's goals for the asset class
structuring each investment to manage risk and optimize for upside
taking board or observer seats as appropriate to maximize visibility and influence
managing each investment to liquidity
sharing its own deal flow and, only when appropriate, that of its client base
Family Office Exchange (FOX) research indicates that family offices are moving away from the more traditional “manager of managers” approach as they reconsider the assumptions behind their private equity portfolios, with many choosing to invest directly in real estate and operating businesses, bypassing a manager and fund structure. Success for active family office investors will be determined by the willingness to commit the necessary capital, resources, and investment expertise in order to attract quality deal flow, and to select - and structure - investments with a high likelihood to generate strong returns.
--- Family Office Exchange's Growing Interest in Forging a Direct Investment Path
Direct investments, co-investments, and secondary purchases are attracting more interest from families, in part because they offer a lower cost method of accessing private investments, as well as allowing for immediate capital deployment. For many families, heritage as business owners also makes direct investing (versus fund investing) appealing. While these direct investments can offer significant return potential in their own right, the complexity, risk, and resources required to evaluate these opportunities is even greater than is the case for fund selection.
-- Cambridge Associates, Private Investing for Private Investors