Investment Trends In Family Offices

Family offices have always balanced diversification with taking targeted risk, but it feels like the ground is shifting ever so slightly these days. The fundamentals remain the same: long-term thinking, risk aversion in most areas, and concentration in select opportunities, but the way family offices deploy capital is evolving. These shifts won’t completely upend how offices invest, but they’re gradually reshaping strategies, expertise, and decision-making processes over time.

For context, my discussions are primarily with family offices managing under $1 billion AUM that are typically smaller, more nimble, and more willing to take calculated risks in certain areas of the portfolio. Here’s what I’m seeing firsthand and hearing from peers in similar positions:

1.      Large, Established PE & VC Managers Are Losing Appeal

Fund manager selection remains core to family office investing, but large private equity (PE) and venture capital (VC) managers are losing favor. The issues?

·        They’ve gotten too big. Many now prioritize asset accumulation (AUM growth) over investment performance.

·        Fund vintages over the last decade have underperformed. Many have delivered limited or no distributions, leaving investors with a capital recycling problem.

·        Less flexibility. Smaller offices don’t want to be just another LP in a mega-fund where they have little influence.

What’s replacing them?

2.      Emerging Managers & Independent Sponsors Are Gaining Ground

Instead of writing checks to billion-dollar funds, more offices are allocating capital to emerging managers and independent sponsors. Why?

·        Better alignment. Smaller managers (sub-$500 million PE funds or syndicators) make money only when investors make money.

·        Personal relationships. Investment teams are shifting their skills from picking big-name fund managers to selecting niche, high-performing upstarts with skin in the game.

·        More direct access. Smaller managers offer more transparency and customization in investment structure and decision-making.

3.      Direct & Co-Investments Are on the Rise

Many offices feel disconnected from their investments and are looking for ways to get closer to the ground. The problem?

·        Few offices are built to diligence, close, and manage direct deals.

·        Ownership is a hassle. Running a business is much different than investing in one.

To bridge this gap, offices are increasingly partnering with independent sponsors and operating partners who can source, underwrite, and operate businesses on their behalf.

4.      Using Funds as a Gateway to Co-Investment

Some family offices are investing in funds less for the fund itself and more for deal flow access. Instead of committing large allocations to funds, they’re:

·        Becoming small LPs in select funds to build relationships.

·        Prioritizing managers who offer co-investment opportunities.

·        Structuring co-investment deals to minimize fees while maximizing direct ownership.

For many, the fund isn’t the investment, it’s the cost of entry for better, lower-cost co-investment deals.

5.      Venture Capital (VC) Is Losing Favor

VC had its moment, and likely will again, but for many family offices, the risk-return profile no longer makes sense.

·        Most VC funds have underperformed. The hype rarely meets expectations.

·        Liquidity issues. Companies are staying private longer, and LPs aren’t seeing distributions.

·        Few exits. Valuations may look great on paper, but cash-in-hand matters more.

The takeaway? Family offices are slowing VC allocations and becoming much more selective.

6.      Bitcoin: On the Radar, But Not in the Portfolio

Bitcoin finally made it into investment committee conversations, but it’s still a hard sell.

·        Yes, it was the best-performing asset of 2024.

·        No, it’s still not making its way into most portfolios.

For most offices, the challenge isn’t Bitcoin itself, it’s the lack of expertise, regulatory concerns, and the steep learning curve required to gain conviction in an asset that would, at best, be a 1-2% allocation.

Where This Is All Heading

Family offices, especially those on the smaller side, are moving closer to their investments and seeking more strategic capital deployment. That doesn’t mean they’ll suddenly abandon external managers, nor does it mean they’ll all start running businesses. Most offices won’t overcome the internal expertise gap to fully execute on direct deals, but the conversations are shifting, and the tide is moving toward more active participation in investments.

Final Thought

These are just a few of the trends I’m seeing, but every family office is different. Some are diving in headfirst, others are still watching from the sidelines. What’s missing from this list? I’d love to hear what you’re seeing, drop your thoughts in the comments.