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2016 FOX Global Investment Survey indicates broad engagement in direct investing by family offices

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More than two-thirds of family offices engaged in direct investing in 2015. The finding is one of several key insights in the 2016 FOX Global Investment Survey from Family Office Exchange (FOX).

The study provides an in-depth look at the investment activity of leading single family offices, providing perspective on a range of topics including Economic Outlook and Investment Opportunities for 2016, Asset Allocation and Performance, Use of Investment Consultants and Investment Committees, Reliance on Alternative Investments, and Direct Investing.

According to the report, families with first- or second-generation leadership are much more likely to do direct investing than families with later-generation leadership, with 81 per cent of Gen 1-2 families engaging in direct investing compared to 46per cent of Gen 3 and later. Growth capital is the most popular private equity deal stage (32per cent) followed by venture capital (30 per cent).

“Investing directly in real estate properties or operating companies is familiar for many family offices that earned their wealth by building businesses,” says Charles B. Grace, III, managing director at Family Office Exchange. “In the face of volatility in the public markets, direct investments can seem a haven for those who want transparency and prefer taking risks with companies and/or properties they can investigate and perhaps control in some manner.”

Direct investors tend to be active investors, with forty percent (40 per cent) preferring a lead role that gives them the transparency and control that they desire from their direct investments. When asked where they are finding new direct investing opportunities, 71 per cent of direct investors said they rely on networking or their existing relationships/word of mouth. Proper evaluation of opportunities and deal pricing are the two biggest challenges facing direct investors looking to implement their strategy.

“Deal pricing has become a bigger challenge in executing a successful direct investment strategy as the market has become more efficient,” says Karen Clark, managing director at Family Office Exchange. “Evaluating opportunities is a bigger challenge for participants than finding deal flow.”

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